FUNDING IDEAS, NOT COMPANIES | Rethinking EU Innovation Policy from the Bottom Up
The meeting will start at 12:30 with a networking lunch, to be followed by the presentation of the new joint report by the Institute for European Policymaking at Bocconi University and EconPol/ifo Institute.
Marc Lemaitre (Director General for Research and Innovation) and Dagmar Schuller (CEO and Co-Founder, audEERING) will provide comments ad discuss the way forward for EU Innovation Policy.
Europe has clearly missed the AI bus. This is not an accident but the symptom of a wider and longer-term development. Today’s dominance of US firms in in software and computer services is based on decades of investment on R&D. By contrast, high tech in general, and software in particular, have long been relatively underdeveloped as European industry has specialized in mid-tech industries (that are now exposed the vagaries of Trump’s tariff threats). The recent acceleration of spending on hardware, like datacenters and huge numbers of advanced chips to train the latest large language models has become a macroeconomic factor, driving the outperformance of the US economy over the last years.
As the Draghi report also confirmed, the transatlantic competitiveness gap is thus mainly a high-tech gap. Draghi and other have thus called for a huge increase in European investment to catch up with the US. The European Commission has recently presented in Competitiveness Compass that emphasizes support for ‘innovation driven growth’. But this raises the question of how whether increased EU spending on innovation would help to close the competitiveness gap.
We thus study the track record of EU spending on innovation, that has amounted to over 100 billion euro over the last 10 years; 40 billion of which went to the private sector. But a large part of this was absorbed by firms that became regular customers of various Horizon programs, with little evidence that this increased their competitiveness or their capacity to innovate outside the traditional mid tech sectors. Moreover, detailed econometric analysis reveals that the main instrument of Horizon, namely collaborative projects, often involving 20 participants or more, had at most a short-term impact on output and employment. Moreover, the research topics for the collaborative instruments are the result of bargaining with member states and too detailed, thus stifling innovation. The only instruments that have a measurable lasting positive impact are those for addressed to single recipients, usually SMEs, that do not require the constitution of large consortia and without much top down choices of topics. But these instrument account for only a small portion of all Horizon funding.
We conclude that future EU support for innovation could be made much more productive if it concentrates on programs that do not require large consortia and leave room for innovative ideas.
