In a final report submitted to the European Commission today, an independent Expert Group has called for a Pact for Research and Innovation to be signed by political, business and social leaders to show their commitment to creating an Innovative Europe. The experts state that current trends are unsustainable in the face of global competition.

The goal is to approach 3% of GDP for research. This is an important part of the so-called "Lisbon strategy", which consists in a Partnership between the European Union and Member States to transform Europe in a vibrant knowledge economy, in order to boost economic growth, create more and better jobs and ensure lasting prosperity in Europe.

Therefore a new vision is needed to address a series of productivity and social challenges faced by Europe. The group was set up by the European Commission following the European Council held at Hampton Court in October 2005 and asked to advise on ways of boosting the EU’s research and innovation performance.

The 4-person Group, chaired by former Prime Minister of Finland Esko Aho, argues that there is a large gap between the political rhetoric about the knowledge society and the reality of budgetary and other priorities that have shown little shift in engaging with it.

They propose a 4-pronged strategy focusing on the creation of innovation friendly markets, on strengthening R&D resources, on increasing structural mobility as well as fostering a culture which celebrates innovation.

The reason business is failing to invest enough in R&D and innovation in Europe is the lack of an innovation-friendly market in which to launch new products and services. To create such a market they recommend actions on harmonised regulation, ambitious use of standards, driving demand through public procurement, a competitive intellectual property rights regime and fostering a culture which celebrates innovation. Large scale strategic actions are called for to provide an environment in which supply-side measures for research investment can be combined with the process of creating a demand and a market. The Group identifies several examples: e-Health, Pharmaceuticals, Energy, Environment, Transport and Logistics, Security, and Digital Content. They call for an independent High Level Coordinator to be appointed to orchestrate European action in each area across Member States, different parts of government and the Commission, business, academia and other stakeholders.

There needs to be more effective provision of resources for research and innovation. The 3% target should be seen as an indicator of an Innovative Europe, not an end in itself. More focussed use of research resources is called for, including establishment of centres of excellence and, controversially, transferring resources from low priority areas or sub-standard groups to the most excellent. A new approach to industrial R&D support is based on reinforcing the natural innovation ecology, recognising the interaction between large and small firms.

The Group also calls for wider changes in the application of the EU budget. They see Structural Funds as a key means of giving all regions a stake in the knowledge economy. They recommend that the proportion of these funds given to research and innovation should be trebled from its current level to 20%. More widely they call for innovation to be treated as an objective in all budgets administered by the Commission.

The group identifies a need for “structural mobility” in Europe. This means a new paradigm of flexibility and adaptability in human resources, finance and organisational structures. For example:

• Europe should aim to have 10% of the research workforce in any given year moving across the boundaries of science, industry and government;
• several recommendations are made to reverse the dramatic fall in venture capital investment (only €946 million raised in 2004 compared to €5,370 million in 2002 and €9,660 million in 2000);
• a strong endorsement is made of technology platforms and clusters but the Group warns that their financing and commitment must be of a scale to be able to drive forward their sectors.

The Group was set up in December 2005 and is composed of Mr. Esko Aho (Chairman) - Former Prime Minister of Finland , Dr. Jozef Cornu, former President and COO of Alcatel Telecom, Prof. Luke Georghiou (Rapporteur) of Manchester Business School of the University of Manchester and Prof. Antoni Subirá, of IESE Business School (Barcelona)

The report is available here.

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