EU Innovation Policy: How to Escape the Middle Technology Trap?

The EU is losing the global innovation race. EU industry invests less than its peers in R&D, mostly because it lacks large companies in high-tech industries like pharma and software. EU patenting in these industries has stagnated for a decade while elsewhere it has increased. For over 20 years the same companies, mostly from the automotive sector, have dominated EU innovation activity. We call this the middle technology trap.

Existing EU programmes to foster innovation, including those under the heading of the European Innovation Council (EIC), are far from the gold standard in this sector, the US Advanced Research Projects Agency (ARPA) model. They devote too much of their limited resources to venture capital investment rather than supporting breakthrough innovation, and the few project managers are over-stretched.

We propose an ARPA-style model of governance and a budget-neutral shift of resources to support high-risk, high-return projects that are far from commercial application. Project selection and management should be improved by increasing the scientific and engineering excellence on the EIC Board. The existing venture capital activities should be outsourced to a specialised fund.

The meeting will start at 13:30 with a presentation of a joint report from EconPol/ifo Institute, the Institute for European Policymaking at Bocconi University and Toulouse School of Economics on the topic under the direction of Clemens Fuest (ifo Institute), Daniel Gros (IEP@BU), and Jean Tirole (TSE). 

The presentation will be followed by a panel discussion, introduced by Markus Schulte (Head of Cabinet – Commissioner for Innovation & Research, I. Ivanova). 

Before the meeting you are cordially invited to join a light lunch.