Innovation Policy Studies Status report of latest results, and forthcoming tasks.

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1 Innovation Policy Studies Status report of latest results, and forthcoming tasks. 1. Summary 2. Key general messages 3. Background: Rationale and legal basis 4. Taking stock of latest results achieved 5. Work in Progress. Studies to be launched over Dissemination of results. Updated on

2 1. Summary This note initially reports on the key messages emerging from the results of the innovation policy studies activity of DG Enterprise (in the framework of the Innovation and SMEs programme). It recalls the rationale and added value of this analytical work as well as its legal basis. It then highlights the work in progress and the forthcoming tasks to be carried out over 2002 and The activities to disseminate and present the findings are also reviewed, including the next policy workshops foreseen in Finally, the note contains two annexes: an outline of the 20 innovation papers edited up to February 2002 (Annex I), and a detailed review of main policy findings of the study Corporation tax and innovation (Annex II). 2. Key general messages Five key messages emerge from the 20 studies edited up to now; the degree of consistency in these messages is striking. Firstly, in an increasingly global, increasingly knowledge-based economy, innovation assumes a greater importance than ever before. Competitiveness depends to a far larger extent today than in the past on the ability of manufacturing and service sectors to meet fast-changing market needs as quickly and efficiently as possible through the application of new technology. This capacity to assimilate and apply new knowledge in order to improve productivity and create new products and services relies on scientific inventiveness and entrepreneurial flair. But it is also affected fundamentally by the conditions which permit, encourage and sustain innovative creativity and investment, or those which impede or limit it. In the 21 st century, while innovation will be the primary driver of successful industrial and enterprise policy, it must also inform policy in areas such as education, employment law and taxation. Secondly, innovation is pervasive and diverse. It does and while today should take place in firms of all size, in every region and in every sector, not just in naturally innovative high-tech sectors such as biotechnology and information technology. These emerging sectors are crucial as engines of economy-wide innovation, and while today they may still account for a relatively small share of the European Union s GDP, they may be crucial as sources of future employment. Innovation policy which focuses exclusively on high technology therefore risks to miss the much larger opportunities for improved competitiveness and new products and processes in more traditional industries, which remain the EU s major employers. New knowledge is not only created through research and development. It is also acquired as a result of investment in plant and machinery (Source: Innobarometer) and through human resources development. Even in the high-tech electrical and electronic equipment sector, R&D expenditure only amounts to 27% of overall investment in innovation (Source: CIS). Page 2 of 2

3 Thirdly, although pervasive, innovation is unevenly distributed. The innovation performance of Member States, and of different regions within individual Member States, varies considerably. More specifically, the innovative capacity of industry is highly skewed towards larger firms. There is a growing number of nimble and dynamic technology-based European SMEs. Many are making a vital contribution to technological progress, are achieving great success in international markets, and are growing rapidly. But these cases cannot mask the fact that the innovative capacity of most technology-using SMEs remains weak. SMEs tend to lack both the internal resources and the external networks necessary for easy access to the knowledge, skills, technologies and finance on which innovation depends. Furthermore, technology-oriented SMEs are disproportionately affected by many institutional barriers and costs for 49%, fear of the cost of patent-defence litigation is a significant deterrent to investment in invention, for example. (Source: Study Enforcing small firms patent rights ). Fourthly, innovation is systemic rather than linear. That is, the processes of innovation are multidimensional. They involve many different players, and often take place over extended periods of time. Successful innovation may entail a transfer of technology for instance, from a university or research centre to a company but this is rarely an isolated event. Innovation therefore requires the development, over time, of adequate networking and knowledge transfer mechanisms, which are crucial to exploit the potential of scienceindustry links. Well functioning innovation systems in particular serve to ensure the free flow of information across the interfaces between large firms, researchers, entrepreneurs, investors of all kinds, consultants, patent agents and other intermediaries, local authorities and other actors. Such systems may have technical components but, above all, are networks of individuals. Proximity is an important feature of most innovation systems, and policy-makers rightly devote resources to attempts to create self-sustaining local and regional innovative initiatives, often in science parks centred around universities or large multinational technology firms. Fifthly, appropriate conditions for innovation. The Commission and the Member States should, each at its level of competence, continue to strive to ensure that the appropriate conditions for innovation and entrepreneurship are in place. Apart from the identification and diffusion of good practices, it is important to assess whether the most important elements of a country s system of innovation function well, namely: - The general framework conditions within which R+D and innovation are generated and used, particularly highly competitive markets, flexible, mobile and skilled labour force, and well functioning capital markets (including venture capital) - The overall knowledge base of the EU economies, in terms of well performing economic systems, and efficient public research and business R+D Page 3 of 3

4 - Sufficient incentives for business R+D and adequate rewards for successful discoveries - Adequate networking and knowledge transfer mechanisms to exploit the potential of science-industry links and improve the commercialisation of research both at a domestic and at the EU levels. 3. Background: Rationale, added value and legal basis The added value: Over the last few years there has been an increasing appreciation of the economic and social importance of innovation. An active debate has emerged on the implications for economic policy and the appropriate policies and programmes relating to research, innovation and enterprise. This has recently been reinforced, for example, by: The January 2002 report from the Economic Policy Committee (EPC) on R+D, which was endorsed at the 22 January 2002 ECOFIN meeting. The discussions held at the Informal seminar of Industry and Research ministers (S Agaró (E), 1-2 February 2002) devoted to fostering innovation in the EU. Against this backdrop, the insights offered by innovation papers commissioned by the Commission seek to provide, for a series of priority issues on innovation, a robust and reader-friendly analysis drawn from: - the results of analytical research - international experience - the lessons of previous policies. The papers edited bring the work of international expertise (e.g. academic researchers, consultancy firms) to an audience of policy makers and practitioners interested in innovation issues to contribute to their understanding of the dynamics and factors shaping innovation in firms (its mechanisms, its strengthens and bottlenecks). The findings of papers seek to provide to those interested in the role of public policy and innovation, a solid basis for the formulation, monitoring and analysis of innovation policy. They also serve as instruments, to maintain and continuously improve the Community s resources in the field of innovation. Legal basis These papers contribute to the performance of the Innovation and SMEs programme. Its workprogramme includes an action line relating to Studies and good practices. Page 4 of 4

5 The studies are commissioned to external organisations 1 selected further to competitive call for tenders issued in the Official Journal of the EC. Such calls set the studies technical specifications and the term and conditions governing the selection of tenderers. The latest call for tenders on innovation policy studies was published in April 2001 (See Point 5.2 below, studies to be launched over 2002). 4. Taking stock of latest results achieved. Up to February 2002, 20 papers have been edited. For the sake of clarity, papers are grouped into six thematic categories (latest edited studies are marked in bold). 1) Innovation Policy * Innovation Policy in Europe 2001 (European 17 Trend Chart on Innovation) * Innovation and enterprise creation : statistics and 18 indicators * Innovation Policy in Europe 2000 (European Trend 3 Chart on Innovation) * Innovation Policy in a knowledge-based economy 2 * Statistics on Innovation in Europe 2000 edition. 1 2) Technology transfer * Getting more information from public research 4 * European Innovative Enterprises : Lessons from 5 successful applications of research results to dynamic markets 3) Innovation Finance * Corporation tax and innovation : Issues at stake and review of European Union experiences in the nineties * Guarantee mechanisms for financing innovative technology * Training needs of investment analysts 13 * Informal investors and high-tech entrepreneurship 12 * Corporate venturing in Europe It is worthwhile underlining that the views and analysis contained in such studies do not necessarily reflect the views and policies of the European Commission. The studies and reports are independent publications commissioned by DG Enterprise (Innovation Directorate). Page 5 of 5

6 * Funding of new technology-based firms by 7 commercial banks in Europe * Interim assessment of the I-TEC pilot projects 14 4) Innovation Management * Innovation Management: Building competitive skills 8 in SMEs. * Promoting innovation management techniques in 9 Europe. Assessment of an action line. * Enforcing small firms patent rights. 10 5) Geographical issues and approaches * Innovation policy issues in six candidate countries : the challenges * Assessment of the Community regional innovation and technology transfer strategies ) Communication and awareness * Building an innovative economy in Europe Work in Progress. Studies to be launched over Work in progress The following studies are currently in progress. The dates for the delivery of their reports are tentatively given: 1) Innovative SMEs and employment creation Building on previous research in this field, this study will further explore the complex relationships between innovative SMEs and the creation of employment, in order to shed light on what can and cannot be expected from innovative SMEs in terms of employment creation. Contractors: - Austrian Institute for Small Business Research (IFGH)(Aus). - Institute Vasco de Estudios e Investigación (IKEI) (E) Expected delivery of final report: March ) Industrial relations and innovation Page 6 of 6

7 This study aims to provide policy makers with practical means to analyse, benchmark and improve the framework conditions which determine the innovation-friendliness of industrial relations in a given sector, region or country, in order to foster change and European competitiveness. It will also be of interest to managers, employee representatives and trade union officials. Contractors: Catholic University of Leuwen (HIVA) (B). Expected delivery of final report: June l Page 7 of 7

8 3) Co-operation between the research system and industry to promote innovative firms The study aims to identify the major actors and mechanisms of co-operation between the research system and industry, and to identify legal, administrative and financial framework needed to stimulate the creation of new firms by research institutions. It will also assess existing co-operative schemes involving research organisations and their spin-off firms, and review the incentives motivating individuals to become entrepreneurs. Finally, it will identify potential synergies and conflicts between research organisations and their spin-off employees. Contractors: Sociedad para la innovación y promoción de nuevas tecnologias (SOCINTEC) (E). Expected delivery of final report: August ) Innovation policy and the regulatory framework. Making innovation an integral part of the broader structural agenda. The objective of this study is to provide expertise in innovation theory and policy, and more particularly: to synthesise the new approach to innovation policy in a knowledge-based and creative society to identify and review the links between innovation policy and other policies, in particular those relating to the legal and regulatory framework, with a view to providing analytical pointers for further co-ordination. Contractors: - Louis Lengrand & Associés (F). - Association Nationale de la Recherche Technique, ANRT (F). - The University of Manchester, PREST (UK). Expected delivery of final report: November ) Innovation policy issues in seven candidate countries: Romania, Bulgaria, Slovakia, Latvia, Lithuania, Malta and Turkey. The study will examine and analyse in the seven countries (Romania, Bulgaria, Slovakia, Latvia, Lithuania, Malta and Turkey) the current framework conditions for the following selected innovation issues: a) The Innovation Policy Framework (major actors, policy developments, etc.) b) Specific measures to foster innovation in business (innovation and enterprise culture, secondment of researchers, etc.) c) Business interfaces (university-industry co-operation, etc.) Contractors: - Aide à la Décision Economique, A.D.E. (B). - LOGOTECH S.A. (G). Page 8 of 8

9 - School of Slavonic and East European Studies, University College London (UK). Expected delivery of final report: January ) The power of customers to drive innovation. How to promote innovation in an enterprise policy. The study will analyse the relationships between the patterns of demand of new products, processes and the emergence of new markets. It will illustrate the importance of innovation as both the motivation of consumer demand and the facilitator for enterprises to meet that demand. Finally, it will try to identify patterns/trends of adoption of new products/processes bearing in mind the constant reduction in development cycle time. Contractors: - Business Decisions Limited (UK). Expected delivery of final report: December ) Product innovations: Review of current trends and perspectives for innovation policy action. The aims of this study are to gain greater awareness of the mechanisms that lead to product innovation and employment growth, both in the manufacturing and service sectors. It will also analyse the diffusion patterns of product innovation. Contractors: Sociedad para la innovacion y promocion de nuevas tecnologias (SOCINTEC) (E). Expected delivery of final report: February Projects to be launched over 2002 The following four studies will be launched over March-April 2002 with the selected tenderers following the 2001 competitive call. The final results of such studies should be available in the first semester ) Innovation Management and the knowledge-driven economy: The objectives of this study are: To review and analyse the business relevance of innovation management tools/ methodologies which focus on knowledge as the most valuable asset to a company. To review and analyse major actors (business schools, academic centres, consultancy firms etc.) in this field in the Member States of the EU, Japan and US. Issues at stake and outlook. 9) New products and services. Analysis of regulations shaping new markets. Page 9 of 9

10 To review and evaluate the impact of European regulatory systems on the creation of new technological markets, and to compare and contrast this with the US and Canada. To review the rationale behind regulations relating to new products and services. To identify both bottlenecks and market opportunities created by such regulations. Detailed analysis of the environmental, food and pharmaceutical sectors. To collect and analyse the opinions and attitudes of stakeholders towards current regulatory frameworks relating to innovation. To identify issues at stake, trends and outlook. 10) Innovation in the Service Sector. Issues at stake and trends: To analyse and evaluate the concrete and theoretical impacts of innovation on the competitiveness and growth of the services sector, and the subsequent impact of this growth on innovation. The study will cover the 15 Member States of the EU, Canada and US. To identify and analyse of challenges to service growth, focusing in particular on educational/training resources. To review, by means of 10 case studies, innovation-related/stimulating training courses in the EU Member States, the US and Canada. To collect the opinions and feelings of a representative group of firms, business representatives, training sectors, public support organisations and academics on the situation and challenges to foster innovation in the services sector. To review issues at stake and outlook. 11) Review and analysis of selected results of innovation policy studies: To review the main findings of the studies launched by the Innovation Directorate of DG Enterprise over 2000/2001 to identify and analyse specific aspects of innovation of interest to policy makers. To put the findings of these studies into the context of the Community innovation objectives. To recapitulate their content for the non-specialist, and present them with illustrations in a booklet for wide dissemination. Printing and delivery of the booklet. 6. Dissemination of results. The effective dissemination of the results of these studies is an essential element of this initiative. The results are disseminated at large by: Publications edited by the Official Publication Office of the EC (OPOCE). Articles and dossiers periodically edited in newsletters of the Commission, such as Innovation and Technology Transfer (ITT), Cordis-Focus, etc. The Commission s CORDIS web site (http://www.cordis.lu/innovationsmes/src/studies.htm). Reviews of available studies in promotional publications such as Building an Innovative Economy in Europe, edited by OPOCE in Page 10 of 10

11 Presentation of results in seminars, workshops, etc. Two policy workshops are being organised to present and discuss with selected stakeholders the findings of the latest two studies: * Corporation tax and innovation April 2002 * Innovation policy issues in six Candidate Countries June 2002 firms. Page 11 of 11

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