Tying Europe’s investments into research and innovation to its economic progress is one of the biggest challenges facing the EU. This article draws on documents previously published by Jyoti Banerjee in order to lay out the linkages that allow investment in research to foster economic growth.
The relationship between research, innovation and economic impact is summarised, followed by a brief discussion on benchmarking methodological issues. The structure of this section is as follows:
* European response to the Lisbon growth agenda
* The link between research and growth
* Cross-linking innovation to research and growth
* Exploring FP research impacts on innovation
* Benchmarking issues in innovation
At the IST 2004 conference in Brussels, Fabio Colasanti, director general Information Society, identified Europe’s engagement with technology and research as key to establishing the regional bloc as the most competitive in the world. The foundation of the Commission’s concern in this regard is the report on European competitiveness by Wim Kok highlighting the European Union’s slower-than-expected progress towards the Lisbon goals agreed by the member states in 2000.
The Commission has identified higher economic growth as a basic pre-condition for any of the economic or social advances encapsulated in the Lisbon Agenda. The problem is that the EU today lags behind its international competitors in terms of growth potential.
Consequently, there have been a number of efforts implemented to increase Europe’s growth opportunities. In April 2005, the Commission announced the Competitiveness and Innovation Framework Programme (CIP) which has a budget of €4.2bn aimed at helping European industry and enterprise be more innovative, and as a result grow faster and create more jobs. In a sense, the CIP stands on the shoulders of past programmes and initiatives that have aimed to enhance European innovation via strong R&D initiatives.
European Research Area
The main areas for FP6 research investment were chosen to build on Europe’s existing strengths and market leadership in technology areas, particularly in ICT, such as mobile and wireless systems, micro and nano-electronics, and business software. The intention was to bring together academic researchers, enterprises and government organisations across Europe to create a European Research Area (ERA) so that Europe can master these vital technologies, rather than simply import them.
The creation of the ERA was seen as a way of fostering an internal market for science and technology and the Commission and Member States were invited to create the conditions for greater business innovation, with a view to contributing to the Lisbon objectives, key instruments being S&T, RTD and innovation backed by adequate funding.
RTD
Information and communications technology (ICT) is a key driver in improving productivity and economic growth. In Europe, almost 40% of the productivity growth in the last ten years has been due to ICT, according to the Commission. Also, there is evidence suggesting that Europe’s productivity gap with the US is to large extent explained by its weaker investment in ICT.
Given these concerns, it is not surprising that the largest chunk of the FP6 research programme has been sunk into ICT. In 2003, 420 proposals were selected for funding, covering essential technology components and their integration into various application contexts. Together, these proposals received around 1.7 billion euros of EU funding. However, only 16.5% of the money was aimed at SMEs across Europe, which are widely regarded as the engine room for growth, with more effort needed to get SMEs to the point where they could take advantage of such funding.
Linking research to growth
Given the linkages between research and economic growth, it is unsurprising that a number of attempts have been made to surface the way in which the links work.
For example, a European Commission study in 2004 by a consortium led by IZET into the impact of the IST programme and its predecessors identified 58 “high-impact” projects, though the project methodologies limited the study to the expected impact at the end of the study, rather than actual impacts.
Further, a November 2004 study aimed at developing a pragmatic methodology for integrated impact analysis of all R&D activities found that the IST priority in FP4 and FP5 led to the increase of the knowledge base, researcher skills, and the development of the research networks in many areas where Europe is currently the IST leader, such as Mobile Communications and Microsystems.
Historically, and none of these studies changed the facts on this score, it has been difficult to measure progress of FP-supported research activities against the EU’s higher level policy objectives, such as the Lisbon agenda or the creation of the European Research Area (ERA), primarily because of the perceived “attribution gap” between research outputs and higher level outcomes. The commonly held view that “one thing automatically leads to another” perhaps reinforced the use of quantitative targets and performance indicators as evidence of these higher level impacts, even if it were not necessarily the case.
Cross-linking innovation to research and economic growth
Innovation is a complex process, linking as it does technological, social, economic and cultural dimensions. It is wide-ranging in the way it brings together scientists, developers, marketers, and customers. Given the many studies showing that innovation positively impacts economic growth, it is not surprising that innovation is a hot topic among policy-makers, who usually have to choose between broadly-based policies and support schemes that touch many aspects of innovation, or precisely-targeted measures that address a particular problem. Some try to do both.
Governments used to define innovation using linear measures such as technical change and product development. Now a more systemic perspective is common, with organisational change and process renewal also being regarded as important factors impacting innovation-led change.
While much of the innovation that takes place is actually accomplished in the private sector, governments feel that they can contribute and catalyse innovation processes through:
* the provision of financial support
* shaping of the innovation environment through knowledge management and technology diffusion
* removal of innovation hurdles in the regulatory environment
All these feature in the European Commission’s innovation system, which has the Framework Programme as its centrepiece.
Overview of the impact of FP research results on innovation
In line with Art 163.1 of the Treaty of Rome, a key objective of Community publicly-funded research must be the exploitation of results, in addition to the production and dissemination of new scientific knowledge. For the purpose of present study, innovation will be defined as consisting in the commercial exploitation of existing or newly developed knowledge. The project will concentrate on innovation that derives not only from the dissemination, but especially from the exploitation of R&D project results, with a particular focus on the link between innovation and competitiveness.
Close to market activities like demonstration activities, pre-normative research interoperability test, training or exploitation plans can be financed by RTD FP funds and economic impacts which mainly stem from the commercial application of research results are to the benefit of companies who do the exploiting, namely industry, users and the economy as a whole. The evaluation of these impacts is complex and the indirect commercial applications are even more problematic, with problems of attribution. While specific achievements can be linked to FP research, commercial applications may be combined with existing product technologies, the results of research undertaken elsewhere and funded from other sources.
Other economic impacts, for example the impact on time to market and the structuring of the innovation area (“cluster effect”) might have lasting effects on innovation and competitiveness, but cannot be easily attributed to a single project. Such impacts can be difficult to assess also. Economic impact should embrace societal effects and research programmes may cause changes in participant behaviour and organisational competencies, including the creation of new organisational forms to implement programmes and exploit results, as well as networking activities.
It will be important to adopt an approach based on the relevance of research activities to Treaty objectives (notably Art. 163), rather than on a mere criterion of “excellence” of each single project, and to identify this relevance beyond the specific objectives of the individual projects.
Benchmarking innovation processes
Benchmarking is not a race. Instead it should be viewed as a learning process by which an organisation, whether public or private, compares itself to its homologues in an effort to understand the changes happening around it and to find ways in which it can participate in and exploit those changes.
Benchmarking innovation is no simple task. For policy-makers, it is not sufficient to assess innovation performance – it is equally important to understand how that performance was achieved.
The two key issues in benchmarking innovation are:
* Innovation activity – the number of new products, processes, services and concepts developed within a particular innovation system
* Technology diffusion – the rate at which the innovations are spread so that overall economic performance is enhanced
Further, benchmarks sometimes have to deal with outputs other than innovation, such as competitiveness and globalisation. Handling multi-dimensional benchmarks often requires composite indicators, which must be popular because there are so many of them out there. The difficulty is that they are, more often than not, quite different from each other, indicating that there is a lack of agreement as to what makes a successful composite benchmarking indicator, particularly when it comes to innovation.
Overall, we can see that there are strong interactions between R&D investment, innovation, technology diffusion, growth and economic performance. But the linkages between these are not always clear, measurable or even reproducible between different regions, nations or economic blocs. Countries and economic blocs like the EU need to consider these issues with care before assuming that investment in one leads to a pay-off in the other.
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