EU Innovation Policy
Innovation plays an increasingly important role in our economy. As well as benefiting the EU’s consumers and workers, it is essential to creating better jobs, building a greener society, and improving our quality of life. It is also key to maintaining the EU’s competitiveness on global markets. Innovation policy is the interface between research and technological development policy and industrial policy and aims to create a framework conducive to bringing ideas to market.
Legal basis
Article 173 of the Treaty on the Functioning of the European Union (TFEU), which states that ‘the Union and the Member States shall ensure that the conditions necessary for the competitiveness of the Union’s industry exist’.
Articles 179 to 190 of the TFEU regulate the Union’s research and technological development (RTD) and space policy. The main instrument of RTD policy is the multiannual framework programme, which defines the objectives, priorities and financial support package. The RTD framework programmes are adopted by the European Parliament and the Council, following the ordinary legislative procedures, with prior consultation of the European Economic and Social Committee.
Objectives
The importance of innovation policy is widely recognised and it is closely linked to other EU policies, such as those on employment, competitiveness, the environment, industry and energy. The role of innovation is to turn research results into new and better services and products in order to remain competitive in the global marketplace and improve people’s quality of life.
The EU spends a smaller percentage of annual GDP (2.3% in 2020) than the United States (3.45% in 2020) and Japan (3.26% in 2020) on research and development (R&D). In addition, there is a brain drain effect, as many of the EU’s best researchers and innovators move to countries where conditions are more favourable. The EU market remains fragmented and is not sufficiently innovation friendly. To reverse these trends, the EU developed the concept of an ‘Innovation Union’, which aimed to:
- Make the EU a world-class science performer;
- Remove obstacles to innovation – like expensive patenting, market fragmentation, slow standard-setting and skills shortages – which prevent ideas getting quickly to market;
- Revolutionise the way the public and private sectors work together, notably through the implementation of European innovation partnerships between the EU institutions, national and regional authorities and business.
Achievements
A. Innovation Union
The Innovation Union was one of the seven flagship initiatives of the Europe 2020 strategy for a smart, sustainable and inclusive economy. Launched by the Commission in October 2010, it aimed to improve conditions and access to finance for research and innovation in the EU so that innovative ideas could be turned into products and services that drive growth and create jobs. The Innovation Union aimed to create a genuine single European market for innovation, which would attract innovative companies and businesses. To achieve this, various measures were proposed in the fields of patent protection, standardisation, public procurement and smart regulation. Several instruments have been introduced to measure and monitor the situation across the EU and the progress being made, including:
- A comprehensive scoreboard for innovation in the EU based on 25 indicators and a European knowledge market for patents and licencing. The European Innovation Scoreboard (EIS) is a Commission instrument developed under the Lisbon Strategy to provide a comparative assessment of the innovation performance of EU Member States;
- A regional innovation scoreboard, which classifies the EU’s regions into four innovation performance groups: ‘innovation leaders’, ‘strong innovators’, ‘moderate innovators’ and ‘emerging innovators’. This provides a more detailed mapping of innovation at local level;
The Innovation Union also proposed measures to complete the European Research Area to ensure better consistency between EU and national research policies, and to remove obstacles to researchers’ mobility. In addition, European innovation partnerships have been designed to bring together public and private stakeholders at EU, national and regional levels in order to tackle major challenges in society and to help create jobs and growth by combining supply- and demand-focused measures. In education, the Commission supports projects to develop new curricula addressing innovation skills gaps.
B. Horizon 2020 and Horizon Europe
As a Europe 2020 flagship initiative aimed at securing the EU’s global competitiveness, Horizon 2020 was the financial instrument supporting the implementation of the Innovation Union. Although it was the EU’s eighth framework programme (2014-2020) for research, Horizon 2020 was the first programme to integrate research and innovation, and it enacted many of the specific Innovation Union commitments. In November 2013, Parliament adopted the multiannual financial framework (MFF), allocating Horizon 2020 a budget of EUR 77 billion (at 2013 prices). However, the adoption of the European Fund for Strategic Investments (EFSI) in June 2015 meant that this amount was cut to EUR 74.8 billion.
An interim evaluation of Horizon 2020 was performed in 2018 and the results were used to lay the foundations for the structure and content of the Horizon Europe programme, for which a proposal was published in June 2018.
In response to the COVID-19 pandemic, the Commission presented amended proposals for both legal acts on 4 June 2020 to allow additional funding for Horizon Europe to be provided by the NextGenerationEU (NGEU) recovery instrument. On 21 July 2020, the European Council agreed on the recovery plan for the EU, which combines the MFF for the years 2021-2027 and the funds to be made available through the NGEU. The Horizon Europe programme was established by Regulation (EU) 2021/695 of 28 April 2021, which lays down the objectives of the programme, the budget for the period 2021 to 2027, the forms of Union funding and the rules for providing such funding. Regarding Horizon Europe, a budget allocation of EUR 5.4 billion from the NGEU instrument, particularly to support the green and digital recovery from the COVID-19 crisis, was eventually agreed. This forms part of the total Horizon Europe budget of EUR 95.5 billion for the period from 2021-2027. On 10 May 2022, the Commission amended the Horizon Europe work programme 2021-2022, increasing the budget, including for WomenTechEU, to support women-led deep-tech start-ups, and other actions to boost Europe’s innovation potential.
C. Cohesion policy
Cohesion policy also focuses on research and innovation. In more developed regions, at least 85% of resources from the European Regional Development Fund at national level are allocated to objectives related to innovation, with the 2021-2027 priorities being investments in a smarter, greener, more connected and more social Europe that is closer to its citizens.
D. Financial instruments
The Innovation Union also aimed to stimulate private-sector investment. Therefore, among other things, it proposes an increase in EU venture capital investments. In order to improve access to loans for R&D projects and launch demonstration projects, the Commission, in cooperation with the European Investment Bank Group (the European Investment Bank (EIB) and the European Investment Fund), launched a joint initiative under Horizon 2020. This initiative, ‘InnovFin – EU Finance for Innovators’, consisted of a series of integrated and complementary financing tools and advisory services offered by the EIB Group, covering the entire value chain of research and innovation in order to support investments from the smallest to the largest enterprises.
In addition, in November 2014 the Commission proposed its ‘Investment Plan for Europe’ to unlock public and private investments in the ‘real economy’ to the sum of at least EUR 315 billion over a three-year fiscal period. EFSI was one of the three pillars of the ‘Investment Plan for Europe’ and aimed to overcome market failures by addressing market gaps and mobilising private investment. It helped to finance strategic investments in key areas such as infrastructure, research and innovation, education, renewable energy and energy efficiency, as well as risk financing for small and medium-sized enterprises (SMEs).
Furthermore, a programme for the Competitiveness of Enterprises and SMEs (COSME) has also been introduced, to focus on financial instruments and provide support for the internationalisation of SMEs.
E. The European Institute of Innovation and Technology
The European Institute of Innovation and Technology (EIT) was established in 2008 by Regulation (EC) No 294/2008, as last amended by Regulation (EU) 2021/819. Its overall mission is to stimulate sustainable EU economic growth and competitiveness by strengthening the innovative capacity of Member States and the Union in order to address major challenges faced by society. The EIT achieves these objectives mainly through its Knowledge and Innovation Communities, which bring together more than 1 200 partners from business, research and education.
F. Innovation Council
In January 2017, the Commission created a fifteen-member High-Level Group of Innovators that helped shape the design of the European Innovation Council (EIC) in the framework of the Commission’s proposals for the successor programme to Horizon 2020, Horizon Europe. In January 2021, the Commission signed a Memorandum of Understanding between the EIC and the EIT to strengthen their cooperation to support the best European entrepreneurs. In response to the Russian war of aggression in Ukraine, the Commission set aside EUR 20 million to support Ukrainian start-ups through a targeted amendment of the 2022 EIC work programme.
G. European innovation agenda
On 5 July 2022, the Commission adopted a New European Innovation Agenda, proposing 25 specific actions in five flagship areas: funding scale-ups; enabling innovation through experimentation spaces and public procurement; accelerating and strengthening innovation in European innovation ecosystems across the EU; fostering, attracting and retaining deep-tech talents; and improving policy-making tools. Its aim is to place Europe in the lead of the new wave of deep-tech innovation, which requires breakthrough R&D combined with substantial capital investment in order to address pressing societal challenges.
The Commission’s 2022 edition of the Science, Research and Innovation Performance (SRIP) report, also focuses on the EU’s innovation performance in a global context and suggested measures to address issues such as the difficulty of attracting and retaining talent.