European innovation policy – successes but also new challenges

The re-launched Lisbon Partnership for growth and jobs has put innovation and entrepreneurship at the centre and called for decisive and more coherent action by the Community and the Member States in view of mastering the shift towards knowledge based low carbon economy. On this basis, an ambitious European innovation policy has been launched in 2006 and the Small Business Act (SBA) has been agreed. Thanks to the partnership approach between the EU and its Member States progress can today be reported. Almost all Member States have improved their innovation performance. The innovation gap between the EU and its key competitors, the US and Japan, has narrowed. However, the Communication also recognises policy gaps and indicates areas where further improvements both at European and at Member States level are necessary. This analysis will feed into the preparation of the new European reform agenda beyond 2010.

Vice President Verheugen underlined "Innovation cannot be organised by decree. It comes from people, and only people — scientists, researchers, entrepreneurs and their employees, investors, consumers and public authorities — will make Europe more innovative. But they do not act in a vacuum. They act with a mindset and in a framework which either discourages or incites them to enter unknown territories. The lessons presented in this Communication will help us with the preparation of a modern EU reform agenda for the next decade which should have innovation at its heart."

The right framework conditions to enable and stimulate innovation

Some progress has been achieved and notably the SBA aims at easing the life for entrepreneurs and SMEs. The services directive will further strengthen the functioning of the internal market while new EU State Aid rules provide Member States with more effective public policy tools to support Research & Development (R&D) and innovation. Moreover, the costs for European trademark registration have been lowered. While the importance of excellence in education, research and innovation has been recognised, European success stories still need to be replicated across the EU. The protection of intellectual property rights remains key. The EU can in particular no longer afford to remain with a too costly and fragmented patent situation. Innovation in services and the use of ICT will also have to be strengthened further.

More and quicker market uptake of innovative products and services

Regulatory measures and standardisation can drive innovation. Notably the new rules for car emissions, the REACH legislation, eco design measures as well as the Lead Market Initiative will enhance the innovative capacity of several sectors of the European economy. However, the Lead Market Initiative still needs to gain ground across the EU to have a real impact and the potential of public procurement to support innovation remains to be fully exploited.

Financial support for research and innovation

European funds have been focussed much more than in the past on innovation. 86 billion € within the cohesion policy funds have been earmarked to support research and innovation in regions and also rural areas benefit from increased support. Moreover the 7 th Research Framework programme and the Competitiveness and Innovation Framework Programme provide helpful tools, notably for SMEs. However, the procedures need to be reviewed and eased further, the complexity of rules and schemes has to be addressed and coherence enhanced. The provision of venture capital is still an issue. Financial investors should be more prepared to invest in innovative enterprises with a longer term return horizon, going beyond short term profit expectations.

Build more synergies between actors of the innovation process

Steps have been taken to build up synergies between higher education, research and industry, notably under the European Research Area with the launch of a number of Joint Technology Initiatives and the foundation of European Institute of Technology and Innovation.

Looking into the future, the promotion of innovation must remain a key policy priority at all levels within the EU. There is a clear need for a concentration of EU-level efforts on selected areas with European value-added and critical mass. The technologies the EU should master both in terms of research and production will have to be better defined to build synergies. In parallel Member States and regions should also better exploit the potential of partnering and cooperation.

Based on the analysis of achievements so far and the lessons learnt the Commission will explore with Member States and stakeholders the feasibility of proposing a European innovation act aiming at strengthening the partnership approach in innovation as an integral part of the future European reform agenda beyond 2010.