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Bridging the Gap: Policies for Innovation for Ireland in Europe

08 Oct 2013

One of the key topics of discussion at last week’s Global Irish Economic Forum was the need for greater innovation in the Irish and European economy. These discussions come in the broader context of recent policy actions at EU level aimed at stimulating innovation in Europe and, in particular, the announcement of a new measurement of the innovativeness of Member States’ national economies.

On 13 September 2013, the European Commission proposed a new indicator of each Member State’s ‘Innovation Output’. In the first European league table of its kind, Ireland is ranked third behind Sweden and Germany, and is designated as a ‘Top Perfomer’ with a score of 124.8 (the EU average, set in 2010, is 100). [see below]

Source: European Commission Press Release, 13 September 2013: http://europa.eu/rapid/press-release_IP-13-831_en.htm

 

The indicator is composed of a variety of factors, based primarily on countries’ trade and employment statistics. There are four central components:

1.    The number of patent applications per € billion of Gross Domestic Product (GDP);

2.    Employment in ‘knowledge-intensive activities’ as a percentage of total employment;

3.    The contribution of knowledge-intensive goods and services to countries’ overall trade statistics;

4.    The level of employment in fast-growing firms in innovative sectors of the economy.

Measuring and aggregating this data is intended to provide a common benchmark for European countries’ innovation policies and the extent to which they are translating to employment and economic growth. It also provides a useful means of comparing the EU’s overall innovation output with that of some its main trading partners, including the U.S., Japan and Switzerland.

Falling behind

At present, a number of these partners are performing better than the EU in supporting innovation. Based on the new indicator, the EU currently has a lower level of Innovation Output than the U.S., Switzerland and Japan. The EU’s 2013 Innovation Union Scoreboard, which is calculated using a broader range of economic and social criteria, gives Japan, the U.S. and South Korea a substantial lead over their European partners. [see below]

Source: Innovation Union Scoreboard 2013, European Commission, 26 March 2013: http://ec.europa.eu/enterprise/policies/innovation/files/ius-2013_en.pdf


There are, however, a number of more positive signs. The Innovation Union Scoreboard notes that the EU’s performance gap between both Japan and the U.S. has narrowed by approximately 50% since 2008. Six of the ten highest ranked countries for innovation in the World Intellectual Property Organisation (WIPO) 2013 Global Innovation Index are EU Member States (including Ireland, ranked tenth in the index).  

Nevertheless, the gap between the EU and the global leader for innovation, South Korea, is widening rapidly. According to the EU, South Korea’s performance lead has almost trebled since 2008. A trend of even greater concern is that, within the EU, less innovative countries are no longer catching up with the most innovative countries; those already performing well have much higher innovation growth rates than Member States with lower levels of investment, employment and trade.

Problems and solutions

What is driving these trends? In spite of the economic crisis, both public and private investment in research and development (R&D) across the EU has continued to grow steadily.[1] Collaboration between small and medium-sized enterprises (SMEs), overseas revenues from licenses and patents, and the quality of university research have also all been identified as positive aspects of Europe’s innovation infrastructure.[2]

Rather than singling out any one of these components, analysts have suggested that the quality of the links between them is to blame for current downward trends. At the 2013 Digital Agenda Assembly, hosted in Dublin, it was noted that a “gap” exists between industry, government, academia and other actors and that more needs to be done to connect them up. In other words, closer partnerships are required between entrepreneurs, small businesses, investors, universities, governments and other innovative sectors of the economy.

The EU is seeking out better ways to foster these partnerships. The ‘Dublin Declaration’, which was presented to the President of the European Commission, José Manuel Barroso, by participants in the EU Open Innovation 2.0 conference in May 2013, calls for policymakers to support “quadruple helix innovation” that fosters the involvement and interactivity of government, academia, industry and the citizen.

The Declaration makes a number of policy recommendations aimed at encouraging better connections between these actors, including the creation of a European Innovation Strategy; the appointment of a EU ‘Chief Innovation Officer’; and the recasting of the existing European Research Area as a ‘European Innovation Ecosystem’. Since the publication of the Declaration, the EU has announced investment worth €22 billion in new public-private partnerships across a range of innovative sectors, including clean energy, electronics and pharmaceuticals, suggesting that it is taking the need for a more integrated approach seriously. In an IIEA interview in June 2013, the EU Commissioner for the Digital Agenda, Neelie Kroes, highlighted that these and other investments made through the EU’s Horizon 2020 initiative will “tackle societal challenges by helping to bridge the gap between research and the market”.

Similarly, the EU Start-up Manifesto – published in September 2013 by a group of nine European digital entrepreneurs convened by Commissioner Kroes – stresses the need for a holistic European innovation policy that encompasses a full range of public and private actors. The “manifesto for entrepreneurship and innovation to power growth in the EU” highlights education and digital skills, updated data protection laws, greater incentives for venture capital investment in start-ups and government engagement as necessary components of a comprehensive approach to stimulating innovation at ‘grass roots’ level.

Ireland in Europe

Ireland is acknowledging the need for this kind of comprehensive approach. The first phase of Ireland’s National Digital Strategy was published on 11 July 2013, which focuses on promoting e-skills, increasing the number of SMEs trading online and increasing citizen engagement with new technologies. While the Strategy does not directly address capital investment or specific incentives for funding, it can be commended for focusing on some of the foundations of an innovative digital economy – namely a skilled population, opportunities to start businesses and effective cooperation between the public and private sector.

Whether addressing these indirect factors of innovation will further improve Ireland’s performance in terms of patent applications, employment, trade and other metrics of ‘Innovation Output’ in the long term remains to be seen. Questions also remain over whether or not the EU will be successful in closing the ‘innovation gap’ with some of its major trading partners. These issues will be top of the agenda at the upcoming European Council in October, taking place from 24-25 October 2013, the conclusions of which will set the tone for the EU’s innovation policy for 2014.


[1] State of the Innovation Union 2012, European Commission, 21 March 2013, pp.3-4, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2013:0149:FIN:en:PDF

 

[2] Innovation Union Scoreboard 2013, European Commission, 26 March 2013, p.6, http://ec.europa.eu/enterprise/policies/innovation/files/ius-2013_en.pdf


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As an independent forum, the Institute does not express any opinions of its own. The views expressed in the article are the sole responsibility of the author.


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