A Copernican move for EU innovation policy needed

Task force develops policy advice for EU


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The Centre for European Policy Studies (CEPS) has assembled a task force to develop a policy reform plan that will bolster innovation at the European level. In a report to be published in the coming weeks titled, “Unleashing Innovation and Entrepreneurship in Europe: People, Places and Policies,” the task force identifies the various obstacles European entrepreneurs face and offers the EU “coherent policy recommendations” to address its weaknesses.

The task force first establishes three key principles the EU should heed as it reforms its policies related to innovation. Policy should be simple, systemic and socially relevant. According to the document seen by New Europe (the full report is to be published in July), it is most important that new policies are “tied to societal needs.”

“This means that public policy, besides striving to create a suitable environment for entrepreneurship, should seek to incentivise those entrepreneurial ventures and innovation efforts that help addressing the outstanding societal challenges that Europe faces,” reads the report. 

As examples of “societal challenges” facing Europe, the authors cited youth unemployment, aging population and stagnation.

Furthermore, according to the authors, bolstering European innovation begins on the individual level; it is thus necessary that new policies “foster talent and will for entrepreneurship” among EU citizens. Europeans’ limited will to innovate is related largely to issues of access, be they access to data, to diverse skill training programs, to job long-term job security, etc.

According to the report, issues related to jobs for young entrepreneurs hinge on the fact that “technological evolution and the economic downturn are creating substantial tensions and persisting unbalances in the European job market.” Indeed, as many as 80 percent of of European jobs will be obsolete within 10 years.

ECB Chairman Mario Draghi decried the institutional protection of older workers, saying, ““the side-effect is that young people are stuck with lower-paid, temporary contracts and get fired first in crisis times.” Furthermore, the situation is likely to worsen as the market evolves toward the Internet of Things, Artificial Intelligence and Industry 4.0.

Job instability for young entrepreneurs is related to a number of other factors, like the lack of diverse “competences” among workers. As such, the task force recommends the EU “launch a systematic reflection on the security and flexibility needs of the future European job market, with specific focus on employability.”

Places — specifically, collaboration spaces and platforms — comprise another category under which the issues limiting European innovation fall. These “places,” when adequately supported, can act as drivers of entrepreneurship and innovation. Closely linked to the concept of network effects, the “platform ecosystem” is such that the more platforms which exist to host innovation, the more entrepreneurship the “ecosystem” will spark.

According to the report, Europe hosts a relatively unhealthy platform economy, with only 27 of the 176 most prominent platform companies hailing from Europe. These companies make up 15 percent of the companies but only around four percent of the total market value. Europe lags behind necessarily because “we are missing evidence based research on platforms to inform policy.” As such, the task force strongly advises the EU to invest in relevant research.

The authors also suggest the EU can improve Europe’s platform economy by “fostering investments in broadband, the Internet of Things and Industry 4.0, by removing unnecessary regulatory barriers and by addressing market concentration and barriers to competition.”

Finally, the report highlights issues specific to policy problems and how the EU can tap into policy’s potential for bolstering European innovation. To this effect, the authors emphasized that discussion of policy too often boils down to its “mechanistic” aspects, when in reality, “policy emanates from strategy and strategy from vision.” That is to say, innovation calls for more than simple R&D and necessarily requires more than ample funding.

Moreover, according to CEPS, the specific policy reforms necessary for expansion of entrepreneurship in Europe are many. One of the report’s broader, more all-encompassing proposals has to do with a lack of coordination between regional, national and transnational institutions and programmes. Because of this lack of synergy, the charge of coordination is left for the beneficiaries in funded projects. As such, CEPS reports that “it is high time for a more critical review about the effectiveness of demand-side vs. supply-side policies introduced at the EU level,” with a focus on simplifying coordination between all relevant parties.

CEPS’ report concludes on an optimistic note, saying a window of opportunity exists “between the Horizon 2020 midterm review and the likely set up of a European Innovation Council.” The task force proposes three primary amendments that the EU should implement as it updates its overarching institutional framework.

The first of three recommendations is to form two councils (ERC and EIC) to be “tasked with creating an interface between R&I and policymaking.” These will serve as necessary informants to policymakers, who will use “technology roadmaps” to carry out effective policy impact analysis.

Secondly, CEPS recommends the EU call upon one or two agencies (e.g. the EIB and the EIT) to launch “challenge-led, streamlined platforms where research, development, demonstration are tackled for specific societal challenges in a multi-stakeholder fashion, open to new entrants, new technologies, new business models, and citizens.” With one such platform for every societal challenge, these platforms will have “potential to become ‘professional brokering’ structures for the coordination of ‘societal challenges’.”

Finally, according to the report, “stronger, open and dynamic institutions should deal with innovation and entrepreneurship at the regional and local level.” By simultaneously being designed to “include intra-preneurs and exchange ideas and practices with the private sector” and “aim at creating suitable environments for entrepreneurship to flourish,” these dynamic institutions will help Europe to harness knowledge held at regional and local levels.

These recommendations regarding the institutional framework which regulates European entrepreneurship policy aim to “create the necessary stability over the coming decades.”

The report is authored by Totti Könnölä and Jose Manuel Leceta from Insight Foresight Institute and Andrea Renda and Felice Simonelli from CEPS.

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