In light of Europe’s lackluster innovation performance, it is commendable that Germany plans to make research and innovation policy the focus of its EU presidency in the first half of 2007.
Six years ago, European leaders formulated the Lisbon Strategy for turning the EU into an innovation leader.
However, thanks to the incoherent and half-hearted implementation of the strategy, the 25-member block is as far away as ever from becoming the world’s most dynamic and competitive knowledge-based economy.
At the Innovation Summit in Berlin on Thursday, German Chancellor Angela Merkel announced not just her country’s priorities for the upcoming EU presidency, but also called for more private investment in research and development (R&D).
She wants public and private R&D investments in Germany to increase from the current 2.5 percent to 3 percent of gross domestic product (GDP) by 2010.
The EU countries overall currently spend a mere 1.9 percent of GDP on R&D.
Stepping up financing for research efforts would be a good first step towards improving Germany’s, and Europe’s, innovation performance.
However, at the same time, European leaders need to keep in mind that innovation is a bottom-up process. It thrives in environments in which anybody with an interesting idea can turn this idea into a product and bring it to market.
Thus, while increasing support for R&D is certainly a good idea, EU policy-makers should not focus their efforts on trying to predict which industries or companies have the greatest potential for innovation. Instead of handing out grants targeted towards particular sectors, it makes much more sense to make tax credits available to all companies whose research spending exceeds a certain base amount. This will create the kind of dynamism necessary to enable real innovation to bubble up from startups.