DIGITALEUROPE's contribution to the Call for Ideas -Designing a European Innovation Council

Do you agree that a lack of disruptive, market-creating innovation is an obstacle to job creation and economic growth in Europe?

Current mechanisms are not fully achieving the objective of encouraging and leveraging European R&D and innovation at an industrial/commercial level. However, boosting the EU’s performance in innovation is not only about EU funding. Indeed, if one compares data both between EU Member States and between the EU and its major global competitors, many elements can be identified that hold back the EU’s innovation potential. Europe’s problem is not the number of start-ups, but the small fraction of them that manages to grow to a substantial size. Therefore, scaling-up of new high-tech businesses deserves specific policy attention. Within the EU, the fragmentation of the European market and the large differences between Member States in terms of cost of capital, regulatory framework for and cost of starting a new business, to name just a few, all create regulatory uncertainty for investors and block economies of scale.

In a global comparison, EU’s competitors such as the US provide significantly more access to venture capital, spend more in terms of public procurement of innovation and their population is more eager to take risks and compete. The combined effect of these findings lead to a situation where today, a firm in other markets has good reasons to expect a much higher return on its R&D investments than a company in Europe.