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21st Jun 2021

EU economic growth hampered by careless research spending

  • E&Y: 'It is not the quantity of public funding of R&D and innovation, but rather its quality that hampers the EU's economic recovery' (Photo: kukkurovaca)

Failure to ensure that research and innovation money is spent on useful projects is hampering the EU's economic recovery, a new report has said.

Published on Wednesday (4 May), the study by Ernst and Young, the global accountancy firm, suggests that while the EU puts enough money towards R&D projects, the cash is carelessly spent.

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"It is not the quantity of public funding of R&D and innovation, but rather its quality that hampers EU's economic recovery," says the survey, noting that while the Union had several different programmes designed to boost its innovation statistics over the past decade, it failed to reach targets it had set itself in 2000.

The lack of quality control has been compounded by having too many bosses nominally in charge of innovation, or aspects of it, within the European Commission.

While commission officials in the Enterprise and Industry Directorate General (DG) are in charge of programmes designed to support entrepreneurship, their colleagues in the Research DG look after funding of research while those in the Internal Market DG look after patent and copyright laws. State aid for companies, meanwhile, is dealt with by DG Competition.

The number of different people in charge is almost matched by the variety of innovation funds.

"There are so many different programmes for the funding of innovation that companies wishing to receive funding may have problems in realising where to go and for which line of budget to apply," says the report.

Another fundamental problem is the unclear division of power between member states and Brussels.

In several key sectors in which innovation policy would require a co-ordinated and even harmonised approach at the EU level ... national governments still retain their prerogatives," the study continues.

And while the EU has dedicated a key part of its new 10-year economic strategy to creating an "Innovation Union" it is unclear whether the "wealth of information" will once more create a "poverty of attention".

The report suggests the EU needs to shake up its understanding of innovation, drawn from policy thinking from the 1960s. Instead of supply-side innovation policies, the EU should devote more time and energy to the demand-side.

"The EU seldom lets industry and consumers decide which products and technologies are likely to lead to the best outcomes for society," says the report.

It also recommends rethinking how innovation is governed in the EU to ensure the European Commission has sufficient powers to design a meaningful innovation policy and improving public private partnerships to make better use of private capital.

A survey of industry stakeholders carried out by the report's authors found that 88.9 percent of respondents want stronger coordination of innovation policy at the EU level; 81.5 percent believe innovation is too focussed on competition rather than on investment incentives and almost all (96.3 percent) believe the EU should boost partnerships between industry and universities.

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