Innovation Europe > News > Innovation EU Vol1-1 > European Innovation Progress Report

The European Innovation Progress Report (EIPR) analyses challenges and policy responses in the EU’s member states and aims to shed new light on the relevance of innovation policy objectives and responses in the EU’s member states.

It does this by comparing innovation policy and governance at the different levels of European Innovation Scoreboard (EIS) country groups (that is, innovation leaders, innovation followers, moderate innovators and catching-up countries), revealing differences in perceptions of challenges and different approaches to policy design and targeting.

Challenges for innovation policy differ across the member states, depending on the level of economic development, performance of their innovation systems and the “maturity” of innovation policies. While challenges addressing “capability failures” are the most dominant for the EU’s 27 members as a whole, the member states in the “innovation leaders” group give much more emphasis to framework failures. This does not imply that the leaders have weaker frameworks for innovation, but rather a shift to a broader understanding of innovation drivers in their economies.

The EIPR provides a synthesis of the work undertaken by the INNOPolicy TrendChart Network of national innovation experts. Running since January 2000, the INNO-Policy TrendChart was “re-branded” as part of the wider family of PRO INNO Europe® projects, offering a combined package of policy analysis, learning and development to policy-makers in the EU and associated countries.

The main aim of the project still remains to track innovation policy developments in all 27 EU member states, and the 12 countries – Iceland, Norway, Switzerland, Croatia, Turkey, Israel, Brazil, Canada, China, Japan, US and India – that comprise the Network of National Correspondents.

Innovation policy: trends and challenges

Each year since 2006, the INNO-Policy TrendChart correspondents have identified and defined the three key challenges facing innovation policy in their country. The challenges are identified on the basis of a number of elements, with an initial input being the latest available comparative results of the EIS. The challenges identified may not match those of official national policy documents, as correspondents may decide that certain challenges are not well identified in policy statements, or adjust the prioritisation of challenges.

Challenges do not necessarily change from year to year as it can take time for policy measures to take effect or for major failures in the innovation system to be corrected.

The latest report analyses challenges and policy response from the perspective of a typology of failures in innovation systems (market, capability, institutional, network, framework, and policy failures), with the aim of shedding new light on the relevance of innovation policy objectives and responses in the member states.

The analysis suggests that institutional and framework failures are given more emphasis in innovation challenges than are currently present in the actual innovation policy mix. The fact that these challenges have been constantly repeated in many countries over time suggests that there is a need to understand them better and, if needed, adapt policy responses accordingly.

Moderate innovators and catching-up countries give much more emphasis to direct support to companies (“capability failures”), including advisory services and technology diffusion; while the policy-mix in the more advanced countries gives much more emphasis to network failures (possibly reflecting the earlier shift to clusters and joint industry-academia R&D co-operation programmes).

In terms of the correspondence between challenges and the policy response, it appears that while catching-up countries and moderate innovators recognise that they face significant “institutional failures”, the policy response in these countries with respect to this type of challenge remains rather limited.

Since the analysis is based on the number of measures rather than budgets for innovation policy measures, low numbers of new measures in the innovation leaders and followers should not be taken as a sign of generally lower policy activity, but rather as an accumulation effect – a stock of existing measures being currently implemented.

Also, advanced countries tend to introduce a smaller number of larger, more complex support measures. Hence, a future analysis, to be undertaken by the end of 2009, will overcome this limitation by refining the data on the budget of the measures.

Lessons to be learned

Top performers are all doing very well in terms of gathering evidence and using it as policy input. They invest both in the physical and human resources needed and consult with stakeholders effectively.

However, there seems to be a general dissatisfaction (except for Germany) regarding co-ordination mechanisms that have recently been reshaped to face increasing globalisation challenges. A common element in these reorganisation arrangements is an increasing emphasis on the autonomy (institutional or regional) of higher education and commitment to its excellence.

On the other hand, the distribution of power among ministries and the overall size of government differ from the directions of change.

One lesson top performers can teach other countries is how to best organise their system. Stability and quality of the administration have created the required trust for the systems to operate well enough, even if certain areas of co-ordination suffer. In the top-performing countries there is experimentation and they are self-critical, but there is an element of respect between the public and the private sector.

Selective ideas on lessons from other countries improving elements of their innovation governance structures are also included in the report, revealing that innovation governance and innovation policy are more than just powering money and creating organisations – they are about constantly investing in evidence, experimenting with policy, benefiting from learning and raising ambitions.

Future challenges

Policymakers across the member states (and in candidate and associate countries) are currently faced with the challenges of the global financial crisis and climate change. Therefore, policy makers need to change their approach to and their methods of designing, implementing and evaluating innovation policy. Much has been written in recent years about “innovation everywhere”, “third-generation innovation policies”, “society-driven innovation”, “user-driven innovation”, “hidden innovation”, and so on. Yet in reality, innovation policy thinking still needs to take a leap forward from the time when the sole role of public authorities in supporting innovation was to hand out grants (often tied up in the strings of a costly bureaucratic procedure) as a way of motivating enterprises to invest by “sharing the risk” and overcoming “market failures”.

Much of the policy message broadcast by the European Commission and member states in recent years has been about the need to shift the focus in innovation policy from direct public funding of enterprises (state aid) to actions implemented by a partnership of public and private stakeholders seeking to boost demand for innovation (for example, pre-commercial public procurement, green public procurement, and so on) and support, and strengthen “lead markets”.

Yet, still more could be done to shift resources towards these new emerging opportunities and demand-driven type policies that tackle “system failures” rather than short-term reactions to long-term structural shifts.