A broad-based innovation strategy for the EU

In response to a request from the European Council, this Communication sets out a broad-based innovation strategy for Europe, following on from the Communication "More Research and Innovation - Investing for growth and employment" and the recommendations in the report "Creating an Innovative Europe". The Commission says the European Union (EU) must become an innovation-based society. The main objective is to lay down a framework for promoting all types of innovation and encouraging the development of innovation-friendly lead markets. The EU has exceptional innovation potential, however this potential is under-exploited and the European regulatory and economic framework is not conducive enough to innovation.

ACT

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions of 13 September 2006 "Putting knowledge into practice: A broad-based innovation strategy for the EU" [COM(2006) 502 final Not published in the Official Journal].

SUMMARY

To be able to compete, Europe must become more inventive, innovate more and react better to consumers' needs and preferences. A comprehensive strategy is proposed to achieve this.

The European Union has already taken significant steps:

• the Lisbon Strategy for Growth and Jobs of 2005 sets out policies and reforms to make Europe's regulatory and economic framework more innovation-friendly;
• the Commission Communication of October 2005 "More Research and Innovation" sets out a programme of 19 fields of action for the EU and the Member States;
• the National Reform Programmes, based on the Integrated Guidelines of the 2005 Lisbon Strategy, encourage the Member States to take targeted measures to promote innovation, using the Structural Funds.

In spite of these initiatives, the EU economy is still not the innovative world economy that it should be. The report "Creating an Innovative Europe" (the Aho report) recommends urgent action to better exploit the EU's innovation potential. According to the report, the business environment must be made more innovation-friendly. The Commission also thinks that innovation must be part of the core societal values and that citizens should not fear it but understand that it works for the benefit of all of society.

Against this background, the Communication is designed to:

• provide a framework for discussions on innovation at national and European level;
• identify new areas for action;
• introduce a strategy to facilitate the creation and marketing of new innovative products and services in promising areas.

A more innovative European Union

Education is essential for the creation of an innovation-oriented society. The EU and its Member States must therefore facilitate the modernisation and restructuring of their education systems so that they can provide the skills required for innovation, in particular entrepreneurial skills as well as literacy, scientific and mathematical competence, languages and digital literacy.

The EU lacks appropriate skills, in particular in the field of science and engineering, and the absolute number of science and technology graduates is falling. This must therefore be rectified so as not to undermine the future capacity of Europe to innovate.

Transnational and structural mobility (between universities and industry) is also important to enable researchers to acquire new knowledge and find new applications. An open and competitive labour market for researchers must therefore be created.

Barriers hampering the EU's innovation potential persist in the internal market. They affect:

• goods and services;
• consumers seeking access to them;
• the mobility of workers; and
• the availability of venture capital.

The service sector offers a major opportunity for innovation which must be exploited (the sector accounts for more than two thirds of GDP and employment). The creation of a real internal market for services and support for the funding and creation of innovative SMEs in the service sector should enable this opportunity to be seized.

The regulatory environment must be improved. Innovation calls for predictable, flexible, simple and effective regulation that reinforces consumer confidence, protects intellectual property and provides open and interoperable standards. The worldwide success of European business depends on the rapid adoption of such standards. As regards the protection of intellectual property, the Commission sees the adoption of a Community patent which is effective and affordable for business as the most important step. In the meantime, implementation of the London Protocol will help to improve the situation for business as regards intellectual property rights (IPRs). Better enforcement of IPRs on foreign markets is also crucial.

All the public and private stakeholders (business, the public sector and consumers) must be involved in the innovation process. Cooperation between them must be encouraged, in particular in the following forms:

• clusters * in which businesses form part of a whole and interact with one another. Among other things they enhance productivity, promote research and become a focus for developing skills. The Community instruments support cluster policy because they promote innovation. Major transnational European cooperation, across national borders, should help to generate world-class European clusters;
• knowledge transfer between the public research base and industry must be improved;
• strategic partnerships between business and universities. These partnerships must be strengthened to bridge the cultural gap between university research and business needs;
• the European Institute of Technology (EIT), which the Commission would like to see set up to form an integrated partnership of science, business and education for developing a new model for innovation. Students, researchers and businesses will work together in knowledge and innovation communities, in particular to develop know-how in key areas and enhance research and innovation management skills.

Innovation and research require major financial support. The national targets for research could raise the level of research and development investment across the EU if met. Some Community measures are also designed to provide better funding for research and innovation:

• the Seventh Framework Programme which will boost the funding for collaborative research in the period 2007-2013;
• Joint Technology Initiatives (JTIs), which will provide a new funding framework for implementing RTD (research and technological development) agendas in those sectors determining industrial competitiveness;
• earmarking a large proportion of the EUR 308 billion from the Structural Funds for investment in knowledge and innovation;
• the Competitiveness and Innovation Programme (CIP), providing in particular for an increase of 60% in the financial instruments to support entrepreneurship and innovation;
• the Risk-Sharing Financial Facility (RSFF), which will support private investment in high-risk RTD and demonstration projects by means of loans and guarantees;
• the JEREMIE Initiative (Joint European Resources for Micro-to-Medium Enterprises), which will help the Member States to develop financial instruments in favour of SMEs;
• the new state aid guidelines for venture capital, which will enable the Member States to better target state aid on market deficiencies which hamper the provision of venture capital and prevent sufficient funding for research and innovation activities;
• the new framework for state aid for R&D (research and development) and innovation, which will, in particular, enable the Member States to channel their spending into aid for young innovative businesses, innovation advisory and support services, the loan of qualified personnel, process and organisational innovation, and clusters;
• tax incentives for R&D and innovation.

The public sector itself must adopt innovative approaches and exploit new technologies in public administration, to lead the way in creating a more innovative society.

Lead markets

The EU must promote the emergence of lead markets to facilitate the marketing of innovative products and services in promising areas. The emergence of such markets is fuelled by the strong consumer demand for innovative products and services. The idea is to identify those sectors in which the removal of barriers will promote the creation of new markets. The stakeholders, in particular the European Initiative INNOVA and the Technology Platforms, will help to identify and remove specific obstacles to the emergence of innovation-friendly markets. Various areas are conducive to the emergence of lead markets, for example eco-innovation and construction, internal security and defence, transport, space applications and health.

Better European governance for innovation

Structural change to promote innovation must be managed by political leadership. The Member States must continue to recognise and support innovation as a key priority within the Partnership for Growth and Jobs. The Competitiveness Council is requested to regularly assess the impact of national innovation policies on competitiveness.

An improved governance structure for innovation is required to put in place the policies recommended in this Communication. It is essential to establish strong innovation systems in all Member States, building on innovation drivers such as education and knowledge transfer. National coordinating mechanisms established under the Lisbon process should be used by the Member States to monitor effective implementation of their innovation strategies. In the context of the Treaty-based multilateral surveillance, the governance structure of the renewed Lisbon Strategy provides a forum for policy discussions and the exchange of innovation best practice at Community level. The Commission's 2007 annual report will outline the progress achieved, based on the various thematic discussions on innovation in the Council in 2006. Lastly, integrated guidelines should be adopted to guide the process over a three-year cycle, and the Commission will assess the Member States' reforms and policies in the field of innovation.

Roadmap

Ten actions are prioritised under the Lisbon strategy for growth and jobs:

• an increase in the Member States' public spending on education and innovation promotion via the education system and the modernisation of universities;
• setting up a European Institute of Technology, to be operational by 2009;
• development and implementation of a strategy by the Community and the Member States to create an open European labour market for researchers;
• promotion of knowledge transfer between universities, public research organisations and industry;
• mobilisation of the EU's cohesion policy for the period 2007-2013 in support of innovation, including the earmarking of an ambitious proportion of the available funding;
• adoption by the Commission of a new framework for state aid for research, development and innovation by the end of 2006, enabling state aid to be re-oriented and targeted at these objectives;
• presentation by the Commission of a new patent strategy and preparation of a more comprehensive IPR (intellectual property rights) strategy;
• development of an initiative on "copyright levies" to provide a legal framework for copyright which is more conducive to the development of new products and services;
• introduction of a strategy in 2007 to facilitate the emergence of lead markets;
• publication by the end of 2006 of a handbook on how public procurement can stimulate innovation.

Last updated: 24.04.2007