EU innovation policy: time to accelerate

EU Commissioner Günther Verheugen when speaking about the double challenge of moving to a low-carbon economy and handling the economic crisis, admitted that

EU policies on innovation had been fragmented and unfocused. “We have done too many little things that make too little impact”.

The remedy for that, according to the Commissioner, responsible for Enterprise and Industry, is the upcoming 2010 “European Innovation Act”, modelled on the Small Business Act. The fact that it will be DG Enterprise who is responsible for drafting this new piece is a guarantee that entrepreneurship and the SME perspective will play a central role in the strategy. President Barroso, he said, is looking at restructuring the Commission to give a “more targeted, concentrated innovation policy”.

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Ulrika Stuart Hamilton
, deputy Managing Director of Swedish Entrepreneurship Forum, who was invited to participate in the discussion about innovation support for SMEs, suggested that the best thing the Commission could do was to focus on removing obstacles: Instead of creating new tools, special programmes and projects, use and develop the existing ones. The single most important achievement ever by the EU (apart from the overall goal of peace, of course) is the Single Market. But the Single Market is far from perfect. Annual surveys show new and old obstacles, some thousand single market infringement cases are outstanding against member states. And probably many many more obstacles remain, particularly from an SME perspective.

–          Similarly, making sure that the Services Directive is correctly implemented in all member states should be a core task. As everybody knows the service sector is dominating in the EU, constituting some 57% of total GDP, and frontline innovative firms certainly need the greater market to act on, a greater market which  will – at least that’s the idea  – emerge when the Services Directive is in place. Any national differences that will remain, or emerge, in this process will hamper the full potential of innovative SMEs. All differences in implementation or remaining national rules constitute costs and irritation to small firms.

– The third and final measure that I would like to mention is the Small Business Act. It is all very well to list a number of important things but to my mind the SBA could have focused on two things: the think small first principle and removing barriers and obstacles. One of these, also included in the SBA, is the European patent, or rather the lack of it. I know this has been discussed for ages but maybe the fact that the European Court of Justice will take on a central role might solve the problem of litigation procedures. The language issue of the actual patent still remains, unfortunately.

To back her argument that removing obstacles could promote innovation, Ulrika Stuart Hamilton quoted recent Swedish research that showed that firms engaged in international trade have higher productivity than those active only in their domestic market. Imports and exports are important carriers of knowledge, she said.

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Among the other participants of the Brussels debate, led by Hans Martens, Chief Executive, European Policy Centre, were Luc Hendrickx from the European SME organisation UEAPME,  Ian McCoull, Director of Innovation, Scottish Enterprise, as well as designer and entrepreneur Erik Spiekermann, who was also appointed an “ambassador” of the European Year of Creativity and Innovation.

Erik Spiekerman challenged everyone in the room by saying that most people remain fearful of innovation as they see change as a threat to their existence.

–        People who have a fixed salary and not being engaged in entrepreneurial work are generally against innovation, according to Erik Spiekermans experience.

–        More use should be made of designers, they are fundamental to defining problems and finding solutions.

Ian McCoull also wanted to broaden the definition of innovation:

–          Innovation is about more than just “technology, product and process”, he said, adding that policy makers should focus on helping exploit new ideas and turn them into marketable products. – It’s not just about research and development. Policies must include financing regimes, open markets and knowledge transfers.

– Innovation has an important social dimension; innovation is about people.

Luc Hendrix wished for more SME focus in all actions:

–          The EU is too obsessed with cultivating R&D in universities and large innovative companies. But most innovation is created by SMEs. Small business prefer that innovation issues in the Commission be under the responsibility of DG enterprise, which introduced the SME-friendly Small Business Act.

–          The present problem of access to capital also hampers innovation and has to find a solution if europe’s SMEs are to fulfil the hopes for job creation, innovation and competitive edge.

Ulrika Stuart Hamilton, agreed with Luc Hendrickx that there is great expectation that SMEs will help solve Europe’s problems of job creation and innovation. She said, quoting America reseracher William Baumol, that  this faith was quite well founded as “almost all radical inventions” in the last few decades were made by small firms. Modern research also shows that most new jobs are generated by Europe’s smallest businesses, while larger firms have been inclined to reduce staff numbers.

Read more “Reviewing Community Innovation Policy in a Changing World”. COM(2009) 442 final

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