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Private sector slowdown to blame for EU innovation stagnation

The EU is catching up with the US and Japan on innovation. Credit: EBS
The EU is catching up with the US and Japan on innovation. Credit: EBS

A decrease in private sector innovation activities means that levels of innovation in the EU did not increase in 2014, according to the EU’s Innovation Union Scoreboard which was published on 7 May.

The Innovation Union Scoreboard is an annual report that ranks EU Member States according to their levels of innovation and assesses the EU’s overall performance in the global market.

 There has been very little change to the map of innovation across the EU since 2014. Image: EUIt shows that 13 countries have improved their performance since the last assessment but 15 countries are less innovative than in 2013.

Sweden, Denmark, Finland and Germany topped the scoreboard as the EU’s most innovative countries, while Latvia, Bulgaria and Romania remained at the bottom. However, both Latvia and Bulgaria have made significant increases in their performance since 2007, ranking first and second for countries that have improved their innovation the most.

Presenting the results in Brussels on Thursday, Carlos Moedas, EU Commissioner for Research, Innovation and Science, said that the lack of innovation growth in 2014 was due to a decline in private sector innovation activities.

‘What we have seen in the last year is that … unfortunately, things are a little bit stalled,’ he said. ‘The first question is: is it because of the science base, is it because of the resources? No. All that is still improving. Where the problem seems to be coming up is on the private side.’ 

Areas highlighted by the Commissioner as seeing a particular decline include the availability of venture capital as a percentage of economic output, and the share of small- and medium-sized companies with in-house innovation.

Breaking down barriers

‘In the last seven years the European Union has been closing the gap of innovation when compared to the United States and Japan.’

Carlos Moedas, EU Commissioner for Research, Innovation and Science

In order to create an innovation-friendly environment for businesses, Commissioner Moedas said the EU is working to increase access to finance and lower barriers to innovation in the labour markets, product markets and judicial systems.

‘We need more investments to boost the EU’s innovation performance. This should go hand in hand with better conditions and a single market for innovative products and services in Europe.

‘Today you live in a world where speed and scale are extremely important. To have speed and scale you really have to have the right reforms in Europe so we do not have barriers between countries.’

Globally, South Korea is the top innovation performer but the EU also ranks as less innovative than the US and Japan. Since 2007 this gap has been narrowing, however, as innovation has been growing faster in the EU than in the US and Japan.

‘Indicators are not about absolute numbers, indicators are about trends,’ said Commissioner Moedas. ‘What you see is that in the last seven years the European Union has been closing the gap of innovation when compared to the United States and Japan.’ 

Innovation Union Scoreboard

The Innovation Union Scoreboard is an annual comparison of how EU Member States are performing in terms of research and innovation.

It is based on 25 different indicators, which cover three areas: whether conditions are in place to allow innovation to occur, how much firms are contributing to innovation, and how innovation efforts are translating into benefits for the economy as a whole.

The scoreboard also benchmarks the EU against non-EU countries including Serbia, Former Yugoslav Republic of Macedonia, Turkey, Iceland, Norway and Switzerland. A more limited number of indicators are used to assess innovation in Australia, Brazil, Canada, China, India, Japan, Russia, South Africa, South Korea and the US.

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