MEMO/05/366 

Brussels, 12 October 2005 

An action plan to boost research and innovation 


The European Commission has tabled an integrated innovation and research 
action plan, which calls for a major upgrade of the conditions for research 
and innovation in Europe (see IP/05/1252). It launches 19 ambitious initiatives 
to promote innovation and research, such as redeployment of state aid, 
improved efficiency of intellectual property protection, mobilisation of 
additional funds for research, creation of innovation poles, and improving 
university-industry partnerships. For the first time, the plan offers an 
integrated approach to EU research and innovation policies, and is 
particularly focused on improving the conditions for private sector 
investment in R&D and innovation. 

Why should Europe do more to increase investment in research and 
innovation? 

Economic studies show clearly that investing in research and innovation has a 
positive effect on economic growth. One recent study found that for each extra 
percent in public R&D, there is an extra 0.17% growth in productivity. To put this into 
context, average annual labour productivity growth in the Eurozone was 1.2% 
between 1995 and 2003. An increase in EU R&D spending, especially if 
accompanied by increases in spending at national level, could therefore have 
considerable impact on productivity. Another study has found that a 0.1% increase in 
R&D intensity boosts output per capita growth by 0.3-0.4%. (see MEMO/05/199 for 
more details). 

Where does Europe currently stand? 

Europe is lagging behind the US and Japan in both innovation and research. 

Based on a set of comparable data 
Figure 1: EU and US for 16 indicators, the US and 

Composite index gap

0.05 

0.00 
-0.05 
-0.10 
-0.15 
-0.20 
Innovation gap with US 
Japan are still far ahead of the EU 
average and the vast majority of 
Member States. The innovation gap 


EU25 

between the EU and the 
US

EU15 

appears to be stable, with a slight 

US 

increase in the gap for the EU15 

JP 

(Figure 1) largely explained by 
three indicators: EPO, USPTO and 
triad patents (45% of the gap), 

"2002" "2003" "2004" 

population with tertiary education 
(25%) and ICT expenditures (19%). 

Figure 1: EU and US 


The 2005 key figures show that EU R&D intensity (investment as a % of GDP) is 
close to stagnation. Growth of R&D investment as a % of GDP has been slowing 
down since 2000 and only grew 0.2% between 2002 and 2003. Europe devotes a 
much lower share of its wealth to R&D than the US and Japan (1.93% of GDP in the 
EU in 2003, as compared to 2.59% in the US and 3.15% in Japan). The EU has set 
itself the target to invest 3% of its GDP in R&D by 2010. 

Figure 1: Total R&D expenditure (as % of GDP), 2003 

0 
1 
2 
3 
4 
-
1,9 
2,6 
3,2 
1,31 
0 
1 
2 
3 
4 
EU 25 US JP Chi 
Equally worrying is the fact that, while China has lower R&D intensity than the EU 
(1.31% of GDP in 2003), it grew at about 10% per year between 1997 and 2002. If 
these trends in the EU and China continue, China will be spending the same amount 
of GDP on research as the EU in 2010 � about 2.2%. 

Are there significant differences between Member States? 

The picture in research and innovation varies widely across the EU and EEA. 

Innovation performance is measured by the Summary Innovation Index (SII) which 
combines 26 indicators and is calculated for those countries for which adequate data 
are available. Based on their SII score and the growth rate of the SII the countries 
can be divided in four groups: Finland, Sweden, Germany and Switzerland make up 
the group of �Leading countries�. Of these, only Sweden shows a below EU average 
SII growth rate. Denmark, France, Luxembourg, Ireland, United Kingdom, 
Netherlands, Belgium, Austria, Italy, Spain, Norway and Iceland all belong to the 
group of countries showing �Average performance�. Countries �Catching up� are 
Slovenia, Hungary, Portugal, Czech Republic, Lithuania, Latvia, Greece and Cyprus. 
Countries �Losing ground� are Estonia, Bulgaria, Poland, Slovakia and Romania. 

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Figure 2: Summary Innovation Index � current and trend 
performance 

NL 
UK 
DE 
DK 
SE 
CH 
FI 
BE 
FR 
AT 
IS 
LU 
NO 
IT 
JP 
US 
TR 
MT 
IE 
ES 
EE 
LV 
BG 
SK 
HU 
EL 
PL 
RO 
CY 
SI 
PT CZ 
LT 
0.00 
0.10 
0.20 
0.30 
0.40 
0.50 
0.60 
0.70 
0.80 
-5.0 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 
Average growth rate of SII 
2005 Summary Innovation Index 
Dotted lines show EU25 mean performance. 
In terms of the catching up countries, none is expected to be at the EU25 average by 
2010. At best Hungary, Slovenia and Italy will under the current conditions reach 
EU25 average by 2015. Under this scenario, for Malta, Slovakia and Poland the 
catching up process would take more than 50 years. Based on the current trends, it 
would also take more than 50 years for the EU25 to reach the US level of innovation 
performance. 

Spending on research and development varies widely too. Sweden and Finland 
spend more than 3% of GDP. Denmark, Germany, Austria and France are spending 
more than the EU average of 1.93%. Other Member States vary from Netherlands 
and UK who are only just under the EU average, to less than 0.4% of GDP in Latvia 
and Cyprus. 

What is the role of the private sector? 

The EU�s target is that by 2010, two-thirds of total R&D spending should come from 
private financing. This figure is currently about 55%, compared with 63% in the US 
and 74.5% in Japan. There has been a slow-down in business funding of R&D. In 
2002 business funding grew at a slower rate than GDP, and the business share of 
R&D spending is decreasing. Therefore the EU needs to consider the conditions 
within which businesses finance innovation and R&D spending, and see how these 
can be improved. 

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How does the EU monitor the situation in the Member States? 

The European Commission has a number of tools to monitor the performance of 
Member States and the private sector in R&D and innovation spending. 

The first is the European Innovation Scoreboard (EIS), which has been published 
since 2000 on an annual basis. The EIS is the instrument developed by the 
European Commission, under the Lisbon Strategy, to evaluate and compare the 
innovation performance of the Member States. The EIS 2005 (to be published in 
November 2005) will include innovation indicators and trend analyses for all 25 EU 
Member States, as well as for Bulgaria, Romania, Turkey, Iceland, Norway, 
Switzerland, the US and Japan. More information is available at 

http://trendchart.cordis.lu/ 

The Commission also regularly publishes Key Figures on R&D, an annual analysis of 
R&D statistics and trends. The latest report was issued in July 2005 and is available 
at http://www.cordis.lu/indicators. 

Another useful tool is the EU Industrial R&D scoreboard, which measures, analyses 
and compares the R&D investment of the top 500 companies within and also outside 
the EU. The 2005 scorebaord will be made public in November. 

What are the actions proposed in today�s Action Plan? 

The various areas for future EU action are summarised in the table below: 

To put research and innovation at the heart of EU policies 
The Commission will: Member States are invited to: 
1.1 Step up dialogue with stakeholders to 
identify regulatory barriers to research 
and innovation 
http://europa.eu.int/comm/enterprise/regulation/bette 
r_regulation/index_en.htm 
Fully exploit the possibilities of the new 
framework for support to research and 
innovation 
1.2 Adopt a more research and innovation- 
friendly State aid regime 
http://europa.eu.int/comm/competition/state_aid/othe 
rs/action_plan/ 
Transpose Community legislation in a 
way that will promote research and 
innovation 
1.3 Support actions on improving the IPR 
system and its effective use http://www.iprhelpdesk.org 
Adopt the Community patent, and 
meanwhile improve the current system 
1.4 Support, monitor and further develop 
actions under the research human 
resources strategy 
(http://europa.eu.int/eracareers/ ) 
Implement the Recommendations and 
Directive (when adopted) on research 
human resources and other means 
1.5 Promote the use of public procurement to 
stimulate research and innovation 
Consider reviewing procurement 
practices through mutual learning and 
use the possibilities offered by the new 
legislation 
1.6 Define EU guidelines to promote an 
optimal use of R&D tax incentives 
Implement on a voluntary basis the 
forthcoming EU guidelines taking into 
account national contexts 

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To put research and innovation at the heart of EU funding 
2.1 Stimulate the use of Structural Funds for 
driving research and innovation 
http://europa.eu.int/comm/regional_policy/sources/d 
ocoffic/2007/osc/index_en.htm 
Adopt the Commission�s proposals on 
the Cohesion and Structural Funds and 
take full advantage of the wide range of 
new opportunities offered by these 
Funds and by the Rural Development 
Fund, regarding research and innovation 
2.2 Promote a better access to finance for 
innovative SMEs 
http://europa.eu.int/comm/enterprise/entre 
preneurship/financing/index_en.htm 
Make full use of the equity and 
guarantee schemes and engage their 
financial communities to facilitate access 
to finance 
2.3 Support the development of new 
technologies and foster their market 
uptake 
http://fp6.cordis.lu/fp6/calls_activity.cfm?ID_AC 
TIVITY=577 
Adopt the Commission�s proposals on 
the 7th Research Framework 
Programme and the Competitiveness 
and Innovation Framework Programme, 
together with the European Parliament 
2.4 Mobilise national and regional research 
and innovation programmes and other 
sources of funding 
Take maximum advantage of 
Community support schemes to foster 
trans-national co-operation 
To put research and innovation at the heart of business 
3.1. 
Define EU guidelines to improve research 
collaboration and knowledge transfer 
between public research and industry 
Implement the guidelines taking into 
account the national contexts 
3.2. Promote innovation poles and knowledge-
driven and industrial clusters 
Take full advantage of Structural Funds 
for the development of innovation poles 
and participate in EU cluster initiatives 
3.3. 
Provide specific business support 
services to enterprises, in particular 
SMEs, stimulating research and 
innovation http://irc.cordis.lu/ 
Make full use of Structural Funds and 
IRC support for improving innovation 
support services, in particular for SMEs. 
3.4. 
Promote good innovation management 
practices 
http://europa.eu.int/comm/research/era/keyfigures_e 
n.html 
Use new innovation management tools 
and consider innovation prizes 
3.5. Define and implement a strategy 
promoting innovative services 
Consider ways for promoting innovative 
services 
3.6. 
Establishing a European Industrial 
Research and Innovation Monitoring 
System 
http://europa.eu.int/comm/research/era/keyfigures_e 
n.html 
Take account of the results of the EU 
level monitoring and analysis 
To improve research and innovation governance in Europe 
4.1 
Monitor and support national research 
and innovation policy developments 
through the new Lisbon partnership for 
growth and jobs 
http://europa.eu.int/growthandjobs/index_en.htm 
Where appropriate, report on national 
research and innovation policy 
developments in National Reform 
Programmes within the new Lisbon 
partnership for growth and jobs 
4.2 
Further develop policy analysis 
instruments for research 
(http://trendchart.cordis.lu/scoreboards/scoreboard2 
004/index.cfm) and innovation 
(http://trendchart.cordis.lu/) 
Make full use of statistical and policy 
analysis provided by the Commission 
4.3 
Support policy learning platforms and 
facilitate trans-national policy co-operation 
http://trendchart.cordis.lu/annualreports/report2004/I 
nnovation_policy_europe_2004.pdf ) 
Take full advantage of trans-national 
policy learning and co-operation 

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