Investing in research: an action plan for Europe

The European Union (EU) must provide a stronger public research base and make it more attractive to private investment to attain the objective of devoting 3% of GDP (gross domestic product) to research by 2010.

ACT

Communication from the Commission: "Investing in research: an action plan for Europe" [COM(2003) 226 final - Not published in the Official Journal].

SUMMARY

CONTEXT

The Barcelona European Council of March 2002 set the objective of increasing investment in research and technological development and bridge the gap between Europe and its main competitors. This investment should rise from 1.9% to 3% of GDP by 2010, of which two thirds should be funded by companies.

Currently the gap in research investment between the EU and the United States is already in excess of EUR 130 billion a year and is still widening.

To reach the 3% of GDP objective by 2010, two thirds coming from the private sector, the public sector and companies must increase their expenditure on research from 6.5% and 9.5% respectively on average each year.

This initiative forms the Commission's policy response to the objective set in March 2000 by the Lisbon European Council to make Europe the most competitive and dynamic knowledge-based economy by 2010. It complements a series of European initiatives in the field of enterprise and innovation policy and structural reforms in the product, services, capital and labour markets.

ACTION PLAN

The action plan comprises four main sets of actions:

ENSURING A PROCESS OF EUROPEAN COORDINATION

This process is important to ensure that Member States learn from each other's experience and take actions that are mutually consistent.

• Fostering the coherent development of national and European policies Aim: to facilitate mutual learning between Member States in their efforts to increase and improve research investment.Action: setting up an open process of coordination on actions for increasing investment in research and another process of coordination to develop human resources in science and technology.

• Shaping a common vision for the development and deployment of key technologies Aim: to foster effective public/private partnerships involving public research, industry, financial institutions, users, regulatory authorities and policymakers.Action: setting up European technology platforms to bring together all interested stakeholders to develop a long-term vision for key technologies.

• Enabling all regions to benefit from increased investment in research Aim: to encourage regions to develop their own innovation strategies to raise their awareness of the importance of research and innovation.Action: establishing a mutual learning platform, mobilising all the stakeholders (the scientific community, companies, public authorities, financial circles, users and consumers).

• Designing a coherent mix of policy instruments Aim: to facilitate companies' access to an adequate supply of quality human resources and a more responsive public research base through closer interaction with the private sector.Action: using various policy instruments in a coherent way, in particular by developing interaction with policies put in place by other countries (research, innovation, economics and finance, immigration, competition, etc.).

IMPROVING PUBLIC SUPPORT TO RESEARCH AND TECHNOLOGICAL INNOVATION

The action plan focuses on the need to expand and improve human resources, to strengthen the public research base and to enhance the effectiveness of the various public financing instruments.

• Human resources Aim: to attract more students to research, in particular women, attract international researchers to Europe, stimulate mobility between the academic world and industry, and maintain researchers in the profession and in the European research area by offering favourable career development prospects.Action: developing proposals on the career of researchers aimed at facilitating the opening-up of national systems for recruitment, promoting additional measures to improve conditions for researchers in the EU and adopting measures regarding the conditions of entry and stay of third-country nationals.

• Public research base and its links to industry Aim: to promote partnerships among public research institutions providing complementary expertise, knowledge and resources that are often unavailable within companies.Action: initiating regulatory and administrative reform to enable public research institutions to develop more effective links with industry, in particular SMEs, increasing the participation of industry in public research and developing and reviewing the national regimes governing the ownership, licencing and exploitation of intellectual property rights (IPR).

• Improving the mix of public financing instruments and their effectiveness Aim: to increase public support in research and innovation by making more effective use of the various public financing instruments: direct measures, tax incentives, guarantee schemes and support for risk capital.Direct measures and tax incentives can be used for large firms as well as SMEs, while guarantee and risk capital schemes mainly concern SMEs.Action: developing the research and innovation priority as a major axis, streamlining the funding of collaborative research projects within Eureka, optimising the mix of financial instruments and developing cooperation between the 6th framework programme and the European Bank for Reconstruction and Development (EBRD).

REDIRECTING PUBLIC SPENDING TOWARDS RESEARCH AND INNOVATION

Given the current economic downturn, it is important to ensure that budgetary policies favour investment that will lead to higher growth in the future.

• The stability and growth pact and the broad economic policy guidelines Aim: to refocus public spending towards more productive investment, particularly support for research and development, within the framework of the stability and growth pact.Action: encouraging and monitoring the refocusing of public spending towards knowledge, in particular research and innovation.

• Balance between Member State funding and EU public funding until 2010 Aim: to re-examine the financial means available from the EU budget to support research and innovation, taking account of the long-term common target of 3% of GDP for research expenditure.Action: analysing and discussing the public budget requirements with Member States and acceding countries.

• State aid rules Aim: to encourage public support in research, find a balance between the need to ensure on the one hand that distortions of competition are kept to a minimum and on the other that European industry becomes more competitive.Action: clarifying and improving awareness of the forms of public support to research that cause no distortion to competition, preparing the revision of the Community framework on State aid for research and redirecting State aid towards research.

• Public procurement Aim: to ensure that the best quality/price ratio is available to public buyers to enable them to procure products and services with the technology that best fits their needs and make them more aware of the possibilities available within the legislative framework.Action: supporting the development and dissemination of information on the best available technologies for certain key categories of products so as to adapt technologies to their needs.

IMPROVING FRAMEWORK CONDITIONS FOR PRIVATE INVESTMENT IN RESEARCH

The action plan is intended to improve the technological research and innovation environment in Europe, through protection of intellectual property, market regulation, competition rules, fiscal conditions and corporate reporting on research.

• Intellectual property Aim: to take measures to optimise the use made of schemes for intellectual property (IP) rights in Europe, in particular emphasising university institutions and SMEs.Action: supporting EU-wide coordinated IP awareness and training activities, assessing specific research-related aspects of IP law and ensuring that science, engineering and business schools provide basic training in intellectual property rights and technology transfer.

• Regulation of products and standardisation Aim: to ensure that the rules and regulations lay down the essential requirements to protect the public interest and leave the technical implementation of these requirements to European standards organisations (CEN, CENELEC and ETSI) by means of consensus-based standards. Attention should focus on a planned, effective, open and transparent standardisation process which should remain technologically-neutral.Action: identifying technological areas where existing legislation or the lack of legislation is an impediment to the development of new technologies and strengthening the links between the 6th framework report and European standards organisations.

• Competition rules Aim: to revise European competition rules so that better account is taken of research and innovation aspects when assessing market dynamics and competitive conditions.Action: work out guidelines on how the potential efficiencies through technological progress will be assessed in merger decisions.

• Financial markets Aim: to facilitate the application of an action plan for financial services, in particular aspects such as the integration of capital markets in Europe and the emergence of rating mechanisms appropriate to technology-based companies, including SMEs. Attention should also be given to the tax and regulatory environment of risk capital since investors, in particular institutional investors, are highly sensitive to costs and complexity and are likely to divert their investments to other asset classes.Action: adapting the fiscal treatment of risk capital to avoid double taxation of investors and funds and ensuring that EU legislation takes the needs of risk capital providers into account.

• Fiscal environment Aim: to remove tax obstacles to cross-border activities in the internal market by enacting specific legislation targeted at each particular obstacle and introducing a common consolidated tax base for the economic activities of companies.

• Corporate research strategy, management and financial reportingAim: to increase awareness of companies, especially SMEs, of the benefits and ways of integrating research and innovation into their business strategy and management. For instance, business schools should give more attention to an integrated approach to research management within business strategy.Action: setting up an industrial research monitoring, including a score-board, to analyse investment trends and encourage corporate measuring and reporting on research and other forms of intellectual capital.

• Current situationAccording to the data provided in March 2005 by Eurostat, the research and development intensity (measured by the proportion of GDP accounted for by research expenditure) was 1.93% in EU 25 in 2002 compared with 1.82% in 1998. The average annual increase in research expenditure was 4% between 1999 and 2002. By contrast, in the United States, research expenditure represented 2.76% of GDP in 2003 and in Japan 3.12% in 2002. According to Eurostat, the business enterprise sector financed 55% of total research expenditure in EU-25 in 2001, whereas in the United States and Japan, this sector accounted for 74% in 2002. In 2003, the highest research intensity was recorded in Sweden (4.27% of GDP in 2001) and Finland (3.51%), followed by Denmark (2.60%), Germany (2.50%), Belgium (2.33%), France and Austria (2.19% each).

RELATED ACTS

Communication from the Commission to the Council and to the European Parliament on the presentation of a proposal for a directive and two proposals for recommendations on the admission of third-country nationals to carry out scientific research in the European Community [COM(2004) 178 final - Not published in the Official Journal].

Establishment of an open coordination process led by the Scientific and Technical Research Committee (CREST) to enable the Member States who so wish to exchange best practices and develop national measures in six areas:

• reforming public research and strengthening its links with the private sector;
• providing support to SMEs undertaking research;
• developing tax measures in support of research;
• improving intellectual property in the field of research;
• improving the combination of policies and enhancing public funding of research;
• developing human resources in science and technology.

Communication from the Commission to the spring European Council: "Delivering Lisbon - Reforms for the enlarged Union" [COM (2004) 29 final/2 - Not published in the Official Journal].

Communication from the Commission - Science and technology, the key to Europe's future - Guidelines for future European Union policy to support research [COM (2004) 353 final - Not published in the Official Journal].

Last updated: 30.07.2007