Author Archives: Margaret Pesuit

Spreading the word about I3U

Michele Cincera of ULB presenting I3U in Luxembourg

Michele Cincera of ULB presenting I3U in LuxembourgThe I3U consortium has been hard at work presenting the project to academics, researchers, investors, entrepreneurs, and policy makers at a variety of events, many of which focused on innovation and competitiveness. In addition, our partners have published a number of I3U-related articles in scientific journals, such as Scientometrics and Ekonomista. These articles highlight the project’s research on the impact of the Innovation Union, particularly in areas such as R&D funding, incentivising innovation, facilitating collaboration, enhancing scientific potential, the use of financing instruments, scientific advice in policy making, and challenges regarding access to finance.

The partners will continue to present their findings in the coming months, and will talk extensively about the project’s findings at the final conference in September.

 

Measuring the progress of the Innovation Union

Photo by David Dugdale, calculator, pen and accounting entries

Photo by David Dugdale, calculator, pen and accounting entries

The impact of the Innovation Union on R&D, GDP and employment

The European Innovation Scoreboard represents a very useful instrument for assessing the innovation performance of EU countries and for monitoring the evolution of their research and innovation activities. Its system of 25 different research and innovation indicators provides a detailed representation of the situation in the different countries, allowing for a benchmarking along three main dimensions: the “Enablers”, capturing the drivers of innovation performance external to the firm and the influence of public action; “Firm activities”, measuring the innovation effort at the firm level; and “Outputs”, reflecting the impacts of firms’ innovation on their economic performance. In our report, to better understand the overall impact of the Innovation Union, we looked at trends in public and private R&D expenditures as a percentage of GDP. Then, using the NEMESIS model, we calculated the economic and employment impacts of the trends observed from 2007-2015 and projected over a long-term period (2040).

Between 2007 and 2015 the total intensity of R&D (in % of GDP) among the EU-28 increased 0.27 GDP points, split between +0.18 for private R&D, and + 0.09 for public R&D. Nevertheless, the global trend hides differentiated evolutions at the country level. On the one hand, there are five countries where R&D intensity decreased from 2007-2015: Finland (-0.45 GDP point), Luxembourg (-0.30 GDP point), Ireland (-0.04 GDP point), Romania (-0.03 GDP point) and Spain (-0.01 GDP point). On the other hand, there are seven countries where it increased from 0.45 to 0.79 GDP points, well above the EU average: Slovenia (+0.79 GDP point), Slovakia (+0.73 GDP point), Czech Republic (+0.64 GDP point), Austria (+0.63 GDP point), Belgium (+0.63 GDP point), Bulgaria (+0.52 GDP point) and Denmark (+0.45 GDP point). Four of these countries are in Eastern Europe, and this confirms the progress of countries such as Slovakia.

Considering the analysis of the impact of these evolutions on the EU economy in the long-term, using the NEMESIS simulation, the rise of R&D intensity between 2007 and 2015 has contributed to an increase in EU GDP of about 0.74 GDP points. If after 2015 the R&D intensity in EU countries remains at the same level, GDP gains at the EU level would increase 2.75% by 2030 and 3.55% by 2040. The impacts on employment at the EU level have also been calculated using the NEMESIS model. This number would reach 788 000 in full time equivalents in 2016, 521 000 of which would be in research and 267 000 in other production activities. At the national level, the impacts on GDP are in line with the evolution of R&D intensity over the 2007-2015 period. In 2030, they will range from 0% in Spain, whose R&D intensity remained constant from 2007-2015, to 18.5% in Slovenia, which has increased its R&D intensity by +0.79 GDP points, the most important increase in the EU-28. If we look more closely at the country level results, the simulation shows that it is the evolution of external trade that drives most of the impacts on GDP and employment. Although all countries will increase their competitiveness and their position in the world market over the long term, some of them will experience a decrease or only a limited increase of their R&D investments, with loss of market shares in the EU internal market. This is the case for Spain, Luxembourg, Latvia and Romania, all countries for which the gains in the world market are insufficient to compensate for the losses occurred in intra-EU trade, and where the long-term impacts on GDP and employment, if positive, will remain nevertheless very limited.

Modifying the NEMESIS model

One of the major deliverables of I3U will be an overall evaluation of the Innovation Union using the large-scale, multi-country, multi-sector NEMESIS macroeconomic model. To that effect, the 34 commitments of the Innovation Union were subdivided in three categories. First, there are those that cannot be incorporated in the NEMESIS model because 1) they have no direct impact on innovation in particular sectors; 2) their implementation has been delayed; 3) the data needed to measure them do not exist yet; or 4) their effect can best be analysed qualitatively. The second category regroups the commitments that cannot be incorporated in the model because data are missing, imperfect or incomplete; or because the parameters that are needed to quantify their impacts are too uncertain. Finally, 16 commitments and sub-commitments will be incorporated in the proposed modified version of the NEMESIS model through the following channels: skilled capital entering R&D; ICT and other intangibles; financing that reduces the cost of capital; diffusion of knowledge; and rent spillovers, infrastructures, and public investment in the generation of knowledge.

Implementing the IU commitments in the NEMESIS model

One of the important results of the I3U project will be the assessment of the Socio-Economic and Environmental Impacts (SEEI) of the Innovation Union. This assessment will be done with the NEMESIS macroeconomic model, used in the I3U project and specialized in the assessment of EU R&I policies. The model was just used by the European Commission for the design and ex-ante assessment of the next framework programme, ‘horizon Europe’. In I3U, beyond the impact of the EU FP, the analysis of EU R&I policy will be deepened by taking into account the SEEI of the specific commitments of the IU, for which specific quantitative objectives could be identified and analysed in the project. These are notably commitments 24 (for improving) and 25 for increasing the use of the R&I part of cohesion Structural Funds; commitments 10 to 13 that target all actions for developing innovation financing and notably the access to finance of SMEs; commitments 2 to 4 and 30 for enhancing skills, knowledge transfers and attracting the talent needed for R&I activities; and commitments 13, 14 and 17, which are more oriented toward actions to market, involving European patents, innovative public procurements and the creative industries. Along with commitments 6 and 7 for the EU FP, there are 14 commitments that are currently implemented in the model. The I3U project has published a report that describes the methodology that is followed for their integration. An upcoming report to be published at the end of July will present the results of the macro assessment of the commitments individually and by groups, while another one at the end of September will present them ‘as a whole’ in the Innovation Union.

A benchmark scenario with NEMESIS for I3U macro assessments

SEURECO, the I3U partner in charge of the macro assessments using the NEMESIS model, has provided a reference scenario up to 2050 for every European country. This will be used as the benchmark scenario to analyse the results of all the macro simulations of the I3U project.

For short- to medium-term GDP growth projection (up to 2018), it is based on the DG ECFIN 2017 spring forecast and then, for the long term, on a set of exogenous variables (demography, world demand, oil price, exchange rates, etc.) and economic projections similar to the DG ECFIN 2015 ageing report. This baseline scenario was designed for all EU countries at a detailed sectoral level (30 sectors) and it provides results on production, employment, revenues, and competitiveness indicators at the macro and sectoral levels up to 2050.

The principal difficulties when building a forward-looking reference scenario for Europe up to 2050 come from the present context pointing out strong uncertainties and economic challenges, as reflected in the DG ECFIN 2015 ageing report. They concern, for example, the evolutions that can be expected for the other world regions, notably the economic growth in emerging countries, the price of fossil energies and other major raw materials, the new orientations that will prompt a socio-ecological transition, the ageing of the population and the decline of the labour force in Europe as well as in other major world regions, such as China.

For Europe, addressing all these challenges will necessitate a strong innovation policy that will increase labour productivity and create new goods and services adapted to the situation. But will Europe be capable to tackle all these challenges? Will it succeed in increasing all the required qualitative and quantitative components of innovation? The aim of the Innovation Union, together with other complementary structural policies such as the EU climate policy, is to address these challenges.

The state of implementation and impact of the Innovation Union’s 34 commitments

Photo: Mike Seyfang on Innovation Chemistry

Photo: Mike Seyfang on Innovation ChemistryThe I3U project recently released a series of reports on the state of implementation and the impact of the Innovation Union’s 34 commitments. These reports contained very interesting and relevant findings regarding innovation and innovation-related topics in Europe.

Promoting excellence in education and skills development

A report detailing the state of promoting excellence in education and skills development, specifically the Innovation Union’s commitment 30 on retaining and attracting international talent, revealed that the share of highly skilled third country migrants in the total workforce is generally low among EU-13 countries, except for the UK and countries that either have colonial connections (France, Spain, the Netherlands and Portugal), have a high share of migrants in general (Ireland) or of refugees (Sweden).  In addition, the share of highly skilled third country migrants differs across industries and is highest in the mining, business services and public services industries (education, health and social work). At the national level, the relationship between a country’s attractiveness for foreign workers and its scientific performance is positive but not significant, and varies substantially among countries in Europe. At the industry level, there is mixed evidence about the relationship between the sectoral share of high-skilled third country migrants and productivity. A positive and significant relationship is only found in some industries and for some of the indicators employed in the econometric analysis panel. Finally, there is evidence of a jobs-skills mismatch, suggesting that highly skilled third country migrants are more frequently employed in lower productivity occupations, and thus cannot sufficiently utilize their skills.

Evaluating the effects of EU policy instruments promoting R&D

Research regarding the construction of priority European Research Infrastructures shows that the EU was successful in reaching the direct goal of completion or at least initiation of 60% of priority ESFRI infrastructures. However, there is a strong discrepancy between Western Europe (EU15) and Central and Eastern Europe (EU13) in EU framework programme spending, which may increase the innovation gap between member states. The results of the survey research showed that development of RIs contributes to networking and cooperation, as the most common type of additionality experienced by all RI users is network additionality (98% of all RI users), and the most common type of added value results from the possibility of networking with other scientists (95% of all surveyed RI users).

The research also found that FP7, CIP, and H2020 have been implemented successfully and contribute to innovation in the EU. However, there exists a great deal of heterogeneity with regard to efficiency within the programmes studied. In addition, a small number of EU economies account for the bulk of programme funding and economies with a low level of involvement in FP7 and H2020 significantly underperform as compared to economies that are highly involved.

Policy plans to increase SME participation in EU R&I funding have attained above the targeted 20% of the planned budget (23.9%). Funding received from the EU has a positive and statistically significant effect on the R&D intensity and engagement of SMEs in product and process innovation. Analyses suggest that receiving public funding from the EU increases the total expenditures on innovation activities in SMEs by 0.7 percentage points. The results of probability analyses also imply that SMEs that received public funding from the EU are 1.3 times more likely to introduce product innovation than those that did not receive EU funds.

With regard to strengthening the science base for policy making through the Joint Research Centre (JRC), the research shows that the efforts to strengthen the base for policy making are still fragmented. As a result, the impact on policy making is still relatively weak. As the results of the survey conducted among policy makers in the EU show, the majority of policy makers did not use the scientific advice produced by the JRC or EFFLA in policy making. Therefore, building awareness about the importance of scientific advice, as well as how and where this advice can be accessed, is a key issue and could lead to an increased impact on innovation.

The Innovation Union’s commitment to set out the EIT strategic agenda has been 83% implemented, that is, five out of six components of the commitment have been completed successfully and in a timely manner. The impact made by the EIT strategic innovation agenda (SIA) is evidenced by the continuous increase in (i) the number of innovations (number of new or improved products/services/processes), (ii) the number of start-ups created, (iii) the number of business ideas incubated, (iv) the number of new graduates from EIT-labelled programs, and (v) knowledge transfers/adoptions. Knowledge and innovation community (KIC) actions facilitated the creation and growth of SMEs, enhanced the competitiveness of key industrial sectors in terms of their economic impact, brought positive changes to European educational systems, increased social cooperation and improved efficiency in managing energy, resources and waste.

Innovation and access to finance

A separate report presents the state of implementation, the impact assessment and the methodological approach for access to finance within the innovation ecosystem. On average, all the actions foreseen in commitments 10-13 were implemented by the end of 2016. A new financial instrument to support innovative activities, branded as “InnovFin”, was launched, and a European venture capital regulation entered into force in July 2013, designed to facilitate cross-border venture capital funds. In addition, several matching and informational activities were implemented, with the aim of helping firms find new financial or commercial partners and advising them on the innovation process. With regard to the state aid framework for R&D&I, the scope of aid exempted from prior notification to the Commission has been extended, and the administrative burden has been reduced. The integration of commitments in the European Innovation System will be done using the results of the macro-econometric analyses done at the national level.

Involving social partners in developing the knowledge economy

The change in the share of RDI expenditures in total cohesion policy expenditures in the multi-annual financial framework (MFF) 2014-2020 (projections) over the previous MFF 2017-2013 (facts) show discouraging results. Only 7 Member States of the 28 have planned an increase in the share of respective payments. The smart specialization strategy (S3) proved to be a useful tool in making the cooperation between involved actors more efficient and innovative. But making S3 the subject of an ex-ante conditionality in the next MFF would not be expedient, so other types of incentives have been proposed.

Social innovation means learning more about new ways of meeting social needs that are not sufficiently met by the market or the public sector. Social innovation should empower citizens and create new social relationships and models of collaboration. The analysis of the three selected European social innovation initiatives shows that the initiatives have been implemented quite well in terms of fulfilling these intentions.

The measurable effects of the research programme on public sector and social innovation are quite limited. In particular, they result in a relatively small number of implementations in the field of technical solutions, products, services and procedures to solve complex social problems. A stronger focus on getting a clear social impact and the presence of the R&D component would help to achieve the goals indicated in the Innovation Union flagship initiative.

Years after the adoption of the Innovation Union, Commitment 28, which aims to foster the role of social partners in spreading the knowledge economy to all occupational levels and all sectors, is still in an early stage of implementation. Regardless of the failure to implement this commitment, social partners are very active with respect to digitalisation both at the national and the EU level, which is considered as one of the major future challenges in terms of work and social security, even if this does not fall under the heading of the aforementioned commitment.

Three of the Innovation Union commitments are EU policy instruments designed to promote European partnerships and cooperation, and to strengthen the global dimension of the European research and innovation base. Their progress has been assessed in a new report from I3U. The first of these commitments regards European Innovation Partnerships (EIPs), which were launched with the objective of pooling European resources in order to invigorate innovation activity that would address major societal challenges. It has been successful and efficient in its ‘partnership’ aspect, putting in place effective implementation instruments such as the bottom-up ‘commitment approach’ and online marketplaces. These mechanisms ensured shared interest by the participating stakeholder groups in the pursuit of common goals and their engagement in the successful completion of the activities that were undertaken. At the same time, the EIPs did not fully realise one of their main objectives – to boost innovation and innovative breakthroughs. In reality, the EIPs were gradually transformed into practical problem-solving mechanisms and structures that address important societal challenges but do not necessarily generate innovation of the expected and desired scale and scope.

The second covers scientific cooperation with third countries, and it can be stated that here the Innovation Union’s objectives have mostly been achieved. There is empirical evidence that cooperation with third countries, including their participation in EU programmes and activities has increased. At the national level, countries have opened their research programmes to international cooperation, but approaches seem fragmented and require greater coordination. Most importantly, further work is needed to monitor the impact of international cooperation through quantitative indicators. This involves evaluating various dimensions of international cooperation beyond participation in Horizon 2020. Collecting internationally comparable data will be crucial to better understand the impacts of collaboration with third countries in the future.

The third is related to the construction of global research infrastructures (GRI). The state of implementation of this commitment is well advanced. Although the internationalization level of 12 selected GRIs is moderate, institutional initiatives have set the stage for increased international cooperation. Total financing from H2020 INFRA related to 12 GRIs has already tripled in relation to FP7. The impact assessment shows that the financial leverage effect for non-EU participation financed from FP7 and H2020 is higher than that for EU28 entities. The significant impact of EU funds is reflected in the integration of European researchers, and their increased efficiency and productivity.

Conference on the Innovation Union in Europe: Accomplishments and challenges

SGH conference

SGH conferenceA conference on the Innovation Union in Europe: Accomplishments and challenges will be held in Warsaw on September 10, 2018.

Innovation is regarded as a core element of the Europe 2020 strategy as it can help Europe face different economic and societal challenges, such as the demographic changes, health and ageing of European society, global competition, climate change, and resource scarcity. The Innovation Union is one of the flagship initiatives of the Europe 2020 strategy. The main objective of the Innovation Union is to strengthen Europe’s innovative potential. It has been translated into 34 specific innovation policy commitments aimed at boosting innovation in Europe through the development of education and skills, financial incentives, knowledge transfer, cooperation in science, and other efforts.  Eight years after the implementation of the Innovation Union initiative in Europe, where is Europe with regard to innovation performance and what is its impact in terms of competitiveness, growth and employment? The main objective of this conference is to evaluate direct and indirect effects of the EU policy instruments that promote the Innovation Union in Europe and, specifically, a stronger European dimension of the R&D base.

The conference will present the research results of I3U – Investigating the Impact of the Innovation Union.

CONFERENCE OBJECTIVES

  • To compare changes in innovation performance of the EU member states over the last decade;
  • To assess implementation of the Innovation Union initiative in the EU;
  • To discuss evolution of innovation policy in Europe;
  • To analyze the direct and dynamic effects of the EU policy measures on innovation, competitiveness, growth and jobs;
  • To disseminate good practice in policy making

DEADLINES

The deadline for abstract submissions is June 30, 2018 and notifications regarding acceptance will be sent to the authors by July 10, 2018.

Participants presenting a paper during the conference are asked to submit their full papers by July 31, 2018.

Registration deadline: September 3, 2018

More information can be found at the conference website: www.sgh.waw.pl/innovation_conference2018

A call for papers will be released soon.

I3U Project and Scientific Advisory Committee Meeting in Warsaw

I3U Scientific Advisory Committee

I3U Scientific Advisory CommitteeAn I3U Project and Scientific Advisory Committee (SAC) meeting has been held in Warsaw, Poland on 26-27 April 2018. The partners, along with members of the SAC, discussed the main findings of the project and the next planned actions. The discussion focused on the expected contents of the next batch of deliverables “Integration in the Eco-system” due by the end of May 2018.

Subscribe to our mailing list

* indicates required
Email Format