EU Innovation Policy: Can It Help Europe Escape the Middle Technology Trap?

This paper examines the European innovation ecosystem and the EU's flagship program for innovation, the European Innovation Council, which is part of Horizon Europe. The paper compares patterns of R&D spending of the EU to other large economies - the US in particular - and shows that EU private R&D is concentrated in the mid-tech industry with limited potential for sustained growth.

By contrast, EU companies are almost absent from high-tech industries, where US companies dominate. We identify a number of issues with the EU approach. For instance, support to innovation is substantially lower than in the US, even when national government R&D is factored in; only less than 3% of EU annual budget (~300 million) is devoted to a "DARPA-style" program; public funds fail to catalyse private R&D; a large share of EU spending on innovation goes to SMEs - which are not necessarily the strongest innovators; there appear to be substantial overlapping among the plethora of funding schemes composing Horizon Europe; the governance of EU innovation programs, mostly led by EU officials rather than leading scientists, is inefficient and highly bureaucratic.

Presenters: Daniel Gros and Giorgio Presidente