EUROPEAN COMMISSION Brussels, 30.9.2020 SWD(2020) 214 final COMMISSION STAFF WORKING DOCUMENT Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions



A new ERA for Research and Innovation



































{COM(2020) 628 final}



Contents 1 Context 1.1 The European Research Area (ERA) 1.1.1 Origins and development of the ERA 1.1.2 ERA progress: achievements and shortcomings 1.2 A changing world 2 Setting objectives for R&I under ERA 2.1 Prioritising investments and reforms 2.1.1 Facilitating EU and national investment towards the EU’s priorities 2.2 Improving access to excellence 2.2.1 Advancing Europe together 2.2.2 Nourishing talent for excellence 2.3 Translating R&I results into the economy 2.3.1 Competitiveness of European industry 2.3.2 Strengthening innovation ecosystems for knowledge circulation and valorisation 2.4 Deepening the ERA 2.4.1 A European Framework for Research Careers 2.4.2 Open Science

2.4.3 Research and technology infrastructures 2.4.4 Strengthening the public science system through synergies with the European Education Area 2.4.5 Gender equality to strengthen the European R&I potential 3 The geopolitical dimension of ERA 3.1 Progress so far 3.2 Outstanding challenges 4 Governance of the new ERA 4.1 Current situation 4.2 Trends and challenges 5 References



Figures Figure 1. ERA achievements Figure 2 Participation in PSF activities Figure 3. Doughnut representation of biophysical boundaries and social thresholds (EU) Figure 4. R&I and the economic recovery from the Covid-19 crisis Figure 5. Global GHG emissions and global average temperature change (with median probability) Figure 6. Time for new products and services to reach 100 million users, by year of launch

Figure 7. EU - Gini index of inequality - market income and disposable income (1995 = 100), 1995-2016 Figure 8. EU age pyramid, 2019(1) and 2100(2) (as % of total population) Figure 9. Sustainable Development Goals Figure 10. Transformative R&I policy for ERA Figure 11. Main instruments that will contribute to the development of a transformative ERA Figure 12. Overview of main instruments used at national level Figure 13. Public and business R&D intensity 2018 and total R&D intensity 2000 Figure 14. Public support for business R&D as % of GDP, 2007 and 2017 Figure 15. Evolution of government budget allocations to R&D in the EU (2007 = 100), 2007-2018 Figure 16. Mobility of young professionals (15-34 years) in ICT sector, 2019 Figure 17. Share of New Member States in Horizon 2020 and Framework Programme 7 funding (inner circle) and participations (outer circle) Figure 18. Map of international mobility flows (>3 months) in post-PhD career stages Figure 19. Scaleups in Europe, United States and China, 2018 Figure 20. Public-private co-authored scientific publications per million population, 2008 and 2018 Figure 21. Institutional quality- Regional disparities(1) Figure 22. Share of top-10% most cited publications per 1,000 inhabitants in 2015 (left) and R&D intensity 2017 or latest available (right) Figure 23. Individual satisfaction with research funding, by country (MORE3/MORE4) Figure 24. Open access scientific publications with digital object identifier (DOI) as % of total scientific publications with DOI, 2009 and 2017 Figure 25. Scientific quality and R&D investments Figure 26. Evolution of public funding to universities, 2008-2018

Figure 27. Long-term financial and demographic pressures Figure 28. Gender gaps in R&I in the EU, including dispersion between lowest, median and top EU Member State Figure 29. International scientific co-publications as % of total scientific publications, 2000 and 2018 Figure 30. Mission Innovation



1Context 1.1The European Research Area (ERA) 1.1.1Origins and development of the ERA The concept for a European Research Area was proposed by the European Commission in 2000 with the Communication “Towards a European Research Area”. The Lisbon European Council in 2000 supported the initiative, as it envisaged to overcome fragmentation and isolation of national efforts and systems and to reduce disparities of regulatory and administrative frameworks. ERA, together with the 3% Barcelona objective and the accompanying 3% action plan, was part of the new Lisbon Strategy, which aimed to turn the EU into the most competitive and dynamic knowledge based economy of the world. At that time, the overall aim of the Commission’s approach was to achieve “a better organisation of research in Europe” by addressing the “fragmentation, isolation and compartmentalisation of national research systems” and “the lack of coordination in the manner in which national and European research policies are implemented”. ERA was underpinned by several principles, such as: (I)a common approach to financing large research facilities; (II)more coherent implementation of national and European research activities; more mobile human resources, including a European vision for research careers; (III)greater European cohesion in research; (IV)improving the attractiveness of Europe for researchers from the rest of the world; (V)promotion of common social and ethical values in scientific and technological matters. Additionally, a number of actions around the themes “infrastructures”, “coordination of programmes”, “private investments”, “mobility & careers”, “regional & international aspects”, “society & values”, and “improve evidence-based policy-making” were proposed. In 2002 the Commission identified insufficient Member State engagement as an obstacle towards the achievement of ERA and sought to identify what needed to be done to give new momentum to the ERA initiative by strengthening efforts where necessary and defining new perspectives which would provide the initiative with more effective means of implementation. Box 1. ERA and the subsidiarity principle The European Research Area is a multi-level governance initiative. It comprises policy actions in the areas providing most of the EU added value building on and synergetic to the national and regional research and innovation policies and initiatives, fully in line with the subsidiarity principle and the autonomy of research funding and research performing organisations.

In the following years, the Commission published a series of Communications, expert reports and working documents on the various dimensions of the ERA concept. The 6th Research Framework Programme (2002-2006) and its new instruments were positioned as an important vehicle to implement ERA and some major achievements during this period include: ERA-NETs (2002), EURAXESS (2003), European Charter for Researchers and the Code of Conduct for the Recruitment of Researchers (2005), Article 185 initiatives (2003) and Article 187 initiatives (Joint Technology Initiatives - JTIs) (2007). From 2007 onwards a stronger partnership between the Commission, EU Member States, countries associated to the Framework Programme and stakeholders was sought to revive the ERA process. The Green Paper “The ERA: new perspectives”, published in April 2007, opened this avenue around six priorities. Three additional principles were defined: (i) European research policy should be deeply rooted in European society; (ii) the right balance should be found between competition and cooperation; (iii) full benefit should be derived from Europe's diversity. In 2008, the Council took ownership of the ERA process based on an agreed process (so-called “Ljubljana Process”) and setting out a “vision for the ERA in 2020”. The Council also endorsed concrete initiatives to achieve the ERA: a Commission Recommendation on the management of intellectual property in knowledge transfer activities and Code of Practice for universities and other public research organisations; Communications on a European Partnership for Researchers; Towards joint programming in research; and a strategic European framework for international science and technology cooperation; a Council Regulation for a Community legal framework for a European Research Infrastructure Consortium (ERIC). The Lisbon Treaty modified the articles related to research and technological development. Article 179 TFEU explicitly introduced ERA as an objective for the Union: “The Union shall have the objective of strengthening its scientific and technological bases by achieving a European research area in which researchers, scientific knowledge and technology circulate freely, and encouraging it to become more competitive, including in its industry, while promoting all the research activities deemed necessary by virtue of other Chapters of the Treaties.” Article 182(5) opens up the possibility to adopt legislation to enforce the implementation of ERA: “As a complement to the activities planned in the multiannual framework programme, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, shall establish the measures necessary for the implementation of the European Research Area.” Although the Treaty does not define a “completion date” for ERA, in 2011 the European Council endorsed the objective of ERA to be “completed by 2014 to create a genuine single market for knowledge, research and innovation”. The Commission announced in its Innovation Union Communication that it would propose an ERA framework in 2012. As proposed in the Communication of 2012 and endorsed by the Council, ERA is implemented through six priorities: (i) more effective national research systems; (ii) optimal transnational cooperation and competition, including “jointly addressing grand challenges” and “research infrastructures”; (iii) an open labour market for researchers; (iv) gender equality and gender mainstreaming in research; (v) optimal circulation, access to and transfer of scientific knowledge, including “knowledge circulation” and “open access”; (vi) international cooperation (see following section). The Communication also specified concrete commitments linked to competitiveness and to maximising excellence and returns of public R&I and kept the emphasis on the knowledge triangle and the interlinkage between policies. It reinforced merit-based recruitment to make research careers more attractive, it asked for brain circulation and it linked ERA to the European Semester and its national reform programmes. Stakeholder organisations’ involvement in the governance system of ERA became more formalised through the ERA Stakeholder Platform. Moreover, the Council invited “Member States to identify the national reforms and actions needed for achieving the ERA […] and to present these reforms and their subsequent implementation […] where appropriate in the National Reform Programmes starting from the 2013 European Semester” . In its Conclusions of 30 November 2018, the Council invited the Commission “to publish by mid-2020 a new ERA Communication for the period beyond 2020, based on sound evidence, which may propose revised ERA policy priorities and ERA governance and monitoring mechanisms at national and EU level”. 1.1.2ERA progress: achievements and shortcomings As mentioned above, in 2012 the Commission proposed to achieve ERA with reference to six priorities. This approach has been endorsed by the Council and has since 2015 been implemented through an ERA Roadmap. These six agreed and current ERA priorities are the basis for the following stock-taking of ERA achievements and shortcomings.



Achievements Source: DG Research and Innovation, European Commission.

ERA is an established and well-recognised political framework, which has acted as the policy counterpart of the funding provided through the Framework Programme. Looking back, it is possible to identify a number of success factors. ERA has advanced most through pragmatic and concrete initiatives, which offer valuable tools to policy makers and other stakeholders. In more general terms, ERA contributed to creating a community of research funders and research performers, it served as a basis for sound mutual learning amongst its governmental actors, and ERA has provided the space to raise awareness concerning the divergent research performances in Europe. Achievements include: ·More effective national research systems: indicators show that research excellence in the EU has increased steadily over time, even if progress has slowed down since 2013. Reforms of national R&I systems are encouraged through the European Semester of economy policy coordination, in which R&I policy has gained increased prominence in recent years. The Semester constitutes the basis for an in-depth policy dialogue with national authorities and stakeholders based on factual evidence and cross-country benchmarking: the analysis of the capabilities and performance of the different components of each national R&I system and of the interlinkages between enables to identify the key bottlenecks impeding the full contribution of R&I to growth and national competitiveness. This approach led to targeted Country-Specific Recommendations on issues such as the fragmentation of the public research system, science-business cooperation, the availability of skilled human resources in science and technology, the balance between direct and indirect public support and the broadening of the innovation base. The Semester’s analyses can trigger a request for assistance by Member States through instruments that support national reforms such as the Horizon Policy Support Facility (PSF - see Box 2). The recurrent feedback on the PSF work received from national policy-makers has shown that the operational guidance formulated by leading experts and practitioners proves extremely valuable as enabler of national R&I reforms. Box 2. Policy Support Facility The Policy Support Facility (PSF) is an instrument created in 2015 to help Member States to improve their R&I policies. The PSF uses funding from Horizon 2020 (and Horizon Europe in the future) to support Member States (MS) and Horizon Associated Countries in reforming their R&I system. Its methodologies allow drawing on the combination of the high potential of learning between peers (i.e. policy-makers) and of high-level independent expert advice. Country-specific projects provide national authorities with operational recommendations on how to strengthen their R&I system and tackle specific R&I policy challenges. In Mutual Learning Exercises focused on a particular policy challenge of interest to several countries, hands-on country visits and discussion among peers on national experiences allow participants to identify good practices and success factors. As visible in the figure below, all Member States participated to at least one PSF exercise and intensive users of the PSF include both countries with high and low R&D intensities. Source: Eurostat, World Bank. Note: CH, ME, TR: 2017. The main challenges concerning the PSF are now to: -strengthen its impact (overall dissemination of results, ownership and implementation of the recommendations at national level, synergies with other tools). -strengthen the design stage of each project (considering the critical role of this stage for the success of the project). -extend the range of policy needs that it can address (notably how to unlock the potential of R&I for systemic transformations towards sustainability) and in synergy with the new Technical Support Instrument . ·Jointly addressing grand challenges: national administrations work ever more closely together in public-public partnerships (such as ERA-NETs, Article 185 initiatives, and Joint Programming Initiatives) to jointly address global challenges. Joint Programming and other public-public Partnerships allow the development of joint R&I agendas and coordinated implementation of activities. A sign of this is that the share of GBARD (government budget allocations for research and development) allocated to transnationally coordinated research has been constantly increasing since 2012, although it has been slowing down over the recent years. Pooling resources and research capacities to more effectively address common challenges is one of the main perceived and actual benefits of EU transnational cooperation. It is one of the most frequently mentioned strategic goals in the National ERA Action Plans. This ERA priority is one of the most successful with the ERA headline indicator growing at 3.9% annually between 2014 and 2016, resulting in more than 700 joint calls with a cumulative budget of more than EUR 7 billion in national investments since 2004, and current annual spending of EUR 700-800 million. ·Research infrastructures: over the last twenty years, a collective approach towards the joint investment in and the efficient use of new and existing European research infrastructures has been developed. As a result of the close cooperation of the national governments, the European Commission and the scientific community within the European Strategy Forum for Research infrastructures (ESFRI), the ESFRI Roadmap facilitates and promotes joint European investments in world-class infrastructures, which complements the closer cooperation with the large European intergovernmental organisations. The five editions of the ESFRI Roadmap to date (2006, 2008, 2010, 2016 and 2018) have resulted in the joint planning and development of 55 European Research Infrastructures, of which 37 have already been implemented, across all fields of science and technology, mobilizing close to €20 billion in investments. Among these, 21 new Research Infrastructures were established as European Research Infrastructure Consortia (ERIC) – a legal entity based on the only EU Regulation (2009) in the ERA framework. Moreover, this has had an important impact to the strategic approach to Research Infrastructures at national level, as 22 Member States have prepared national roadmaps in recent years, many of them following the ESFRI methodology and in increasing alignment with European priorities. This work has radically transformed the availability of state-of-the-art facilities for scientists and engineers to carry out their work across Europe, reinforcing Europe’s strong research performance. ·Open Science and knowledge circulation: Open Science has increasingly become policy practice across Europe. There is an increased share of open access publications. In 2017, the total share of EU Open Access papers was 46%. In 2018, the European Open Science Cloud (EOSC) as a common, federated, European framework for storing and sharing publicly-funded research data and related services has been established. It promotes FAIR principles as an important element of Open Science and was implemented as a common initiative of European and national partners. Starting from 2020, all European researchers and research organisations should be able to deposit, access and analyse European scientific data through the EOSC . Knowledge transfer has always been an important objective of ERA. The 2008 Commission Recommendation on the management of Intellectual Property (IP) in knowledge transfer activities was a game changer for many publicly funded knowledge producers. Some EU Member States have made strategic investments in knowledge transfer infrastructures and services such as Technology Transfer Offices (TTOs) and other intermediaries; and some have implemented dedicated policies like the National IP Protocol in Ireland. Despite of these achievements the EU is still lagging behind its global competitors in turning science-based ideas to innovations, and the diffusion of knowledge remains unequal in the Union. Digitalisation, Open Science and Open Innovation have changed the ecosystem in which R&I actors operate. ·Mobility, careers, and an open labour market for researchers: the European dimension of research careers and mobility has been a cornerstone of ERA since its start. According to ERA Priority 3, a truly open and excellence-driven ERA is determined by highly skilled and qualified people who can move seamlessly across borders to where their talents can be best employed. Driven particularly by the EURAXESS pan-European network of support services for researchers and its portal of research jobs, significant progress has been made in removing the geographical barriers to researchers’ mobility and opening up the recruitment process to non-nationals, while facilitating open, transparent and merit-based recruitment processes. oThe support for the training, and career development and mobility of researchers through the funding of excellent doctorates, the provision of fellowships and collaborative research under the Marie Skłodowska-Curie Actions (MSCA) has been remarkable. For the period 2014-2020, MSCA will fund the training and intersectoral, interdisciplinary and international mobility of 65,000 researchers, including 25,000 PhD candidates, and more than 1,000 international doctorates, supporting a new generation of excellent, creative and innovative researchers contributing to important scientific breakthroughs, and allowing universities to set up sustainable partnerships with non-academic partners. oThe Standing Working Group on Human Resources and Mobility of ERAC (SWG HRM) supported the implementation and the monitoring of progress in the implementation of this ERA priority 3 (open labour market for researchers) at EU and national level (e.g. European Charter for Researchers and Code of Conduct for the Recruitment of Researchers, Innovative Doctoral Training, Career Development, EURAXESS activities), as well as the attractiveness of Europe to researchers in general. The SWG HRM also issued a comprehensive toolkit for assisting research performing organisations to implement open, transparent and merit-based recruitment (OTM-R) practices,. oThe 2018 ERA Progress revealed that in terms of the number of researcher job postings from a given country that are advertised through the EURAXESS job portal per 1 000 researchers in the public sector, the EU Member States appeared to be positioned in a downward trajectory with annual average declines of 5 % for the whole country group since 2014. This average annual decline reversed a previous course of positive growth over the 2012 to 2014 period. Results at the aggregate level contrasted sharply with a few very strong growth rates that stood out from the portrait of individual countries (i.e. Finland, Germany, Latvia, Turkey and Luxembourg), whereas decreases were driven by Bulgaria (61 % average annual decrease), Greece (45 % decrease) and Sweden (44 % decrease). oWhile the last ERA Progress Report, based on MORE3 survey results found that 65 % of respondents in EU Member States were satisfied with the hiring procedures in their institution, qualitative analysis confirmed that a large gap still exists between EU countries in terms of the open labour market and career development opportunities provided to researchers. This concerns the availability of opportunities for learning, research funding opportunities, financial security, salaries and shares of fixed-term contracts. This heterogeneity reflects different higher education and research systems, as well as economic developments influencing public budgets for research and hence research funding and working and employment conditions for researchers. In addition, different employment status of researchers across different European countries and the resulting limited portability of social security and pension schemes across borders remains one of the key barriers for international mobility of researchers. oThe growing share of doctoral students with citizenship of another Member State is a positive sign of international mobility. Since 2013, the EU has experienced an annual average growth rate of 3.9% for this indicator. Instruments to foster structural institutional change in higher education institutions, research and technology organisations have been introduced, such as the Principles for Innovative Doctoral Training. Moreover, with the RESAVER programme, the first pan-European multi-employer occupational pension fund was launched in 2017. Since mobile researchers experience significant difficulties accumulating adequate pension provisions, RESAVER intends to tackle this barrier to mobility by allowing researchers to remain affiliated to the same pension fund while moving between countries. For the employer, the pension fund is an attractive solution in terms of fees and features. ·Gender equality and gender mainstreaming in research: positive changes in terms of gender equality are under way in many countries, in which the drafting of an ERA National Action Plan was an opportunity to define gender equality objectives and measures. However, despite the continuous policy attention for gender equality, overall progress has been slow. To support Member States in this ERA objective, in 2016 the Commission launched the Gender Equality in Academia and Research (GEAR) tool to provide guidance on how to develop Gender Equality Plans. The 2018 “She Figures” report on gender in R&I, shows overall improvement. Gender balance has practically been reached in terms of PhD graduates, and the share of women in the highest-level research positions is constantly increasing. ·International cooperation: international cooperation activities between ERA and non-ERA countries is on the rise. ERA countries use different tools to promote international cooperation, from bilateral agreements and dedicated R&I centres to appointing R&I advisors and specialists in their consulates and embassies worldwide. Countries with more developed R&I systems have more collaboration opportunities, and they are also better equipped to sustain and initiate new partnerships. International mobility and training of researchers, and international doctoral networks are promoted at the EU (EURAXESS and Marie-Sklodowska Curie Actions as key programmes) and national level. There is a particular need to facilitate international brain circulation by creating a more diverse set of incentives while foresee and deploy mitigation actions to tackle potential negative effects of mobility, notably in the sending countries. Manifesting a clear EU added value, the European Research Council, as well as the forthcoming European Innovation Council, can be judged as achievements serving the objectives of ERA at the level of the individual researcher and innovator. ERA implementation gaps ERA monitoring reveals that ERA has been lacking most so far in reforming national R&I policies, in attuning national and EU policies, and in ensuring co-evolution of all R&I policies towards common objectives. ·Progress on ERA implementation has slowed down since 2015 and major disparities still exist between countries, or are growing. For example, the balance between competitive funding and institutional funding still varies greatly between countries, with less developed R&I systems and research performing organisations relying mainly on institutional funding. This often affects their ability to attract the best talents. There is also a persistent fragmentation of the science base in these countries. Moreover, a large gap still exists between EU countries in terms of an open labour market and career development opportunities provided to researchers. This results in large differences in the attractiveness of research careers among different countries and regions in Europe. Similar differences also exit for industry-academia-collaboration. The transfer of research results to the market and closer collaboration between industry and academia is still underdeveloped in many ERA countries. ·To achieve alignment between national policies and policies agreed with Member States at the EU level, more systemic coordination between the priorities of public-public partnerships and national research agendas and programmes is still required. Even for European research infrastructures, where a substantial level of coordination has been achieved, the ERA Progress Report 2018 recommends that “to further increase the effectiveness of research infrastructures in Europe, there needs to be a better exchange of information on the actual infrastructure capacity, funding priorities, plans and strategies — both across countries/regions and between research organisations”.

·The persistent lack of a strong European dimension in national policies to ensure a co-evolution towards common objectives indicates that the current ERA framework could have reached its limits with respect to ensuring strong political ownership and commitment. The current national priorities are simply juxtaposed, each developing at its own pace, with different ambitions, actors and mechanisms. They work in silos, which challenges the core foundation of ERA, i.e. its self-conception of being a “single market for research”. ·ERA lacks a systemic approach for policies and reforms, which is key in order to address the current challenges. There is need to have a well-geared transition agenda, supported by the European Commission at all levels of governance. ·Priority setting in research & innovation was not considered part of ERA. Hitherto the concept of ERA was used to address mostly horizontal issues relevant for the R&I landscape. In particular it does not capture important developments, such as the digital economy and artificial intelligence, and it could strengthen relations with, for example, competition policies, state aid, innovation policy, education, skills and other policy areas. ·Regarding international cooperation, despite many positive developments, ERA countries still face several challenges, including a lack of financial and human resources dedicated to establishing and managing international partnerships. Efforts to attract the best international talent with the objective to overcome labour shortages, strengthen research capabilities, boost innovation and deal with grand challenges need to be increased. ·Besides, ERA also lacks recognition of its achievements. Such missing or reduced attribution of success – which is linked to the lack of clear and quantifiable objectives as well as poorly developed monitoring and assessment practices – “limits the ownership of actors in the complex multi-level system”. As the recent ERAC Opinion on the Future of ERA pointed out: “The actual and perceived contributions of effective ERA policies at EU, national and regional levels to competitiveness and ‘welfare’ (quality of life for EU citizens) cannot be attributed and consequently, additional coordination efforts are often seen as a burden and not as an asset. Empirical evidence suggests that this attribution challenge can eventually be overcome by demonstrating the added value through joint actions”. To sum up, 20 years after its launch, ERA is an established, well-known political framework that stimulates cross-border joint R&I action and provokes policy reform as the section on ERA achievements has shown. It has provided important building blocks for ensuring the free circulation of researchers, knowledge and technology. However, ERA needs to adapt continuously to changing social, ecological, and economic circumstances as it otherwise loses attention, commitment, and purpose, and, most importantly, it also needs to deal with priority setting in R&I policies. 1.2A changing world R&I activities are carried out and R&I policies and ERA measures are developed in a context that has changed dramatically over the past years. While the Covid-19 pandemic has been disrupting our society only during the past months, Europe has been facing global long-term changes that are reducing our choices for the future. These changes include climate change, loss of biodiversity, ageing population, and increasing inequalities. The EU has committed to climate neutrality by 2050, and recently proposed an EU-wide, economy-wide greenhouse gas emissions reduction target by 2030 compared to 1990 of at least 55% including emissions and removals. Accelerating research and innovation and improving the collaboration between the private and public R&I in the Member States towards early market deployment of clean technology solutions is vital for reaching this target and provides an economic opportunity for the EU. Against this backdrop, the current way we produce and consume is not sustainable: currently, no country in the world seems to meet basic needs for its citizens at a globally sustainable level of resource use (see Figure 3), and industry is often more part of the problem than part of the solution. It is crucial that we understand what these changes mean for R&I: how they affect R&I, but also how R&I can contribute to addressing the challenges they entail, by providing solutions, by enabling a better understanding, and by making our society more resilient in the long term (Ricci et al., 2017). Source: https://goodlife.leeds.ac.uk/ Note: Orange wedges show social performance relative to a threshold associated with meeting basic needs (blue circle), light blue wedges show resource use relative to a biophysical boundary associated with sustainability (green circle). Wedges with a dashed edge extend beyond the chart area. Ideally, a country would have orange wedges that reach the social threshold and light blue wedges within the biophysical boundary. This graphic is based on Kate Raworth’s work on Doughnut Economics Europe is facing several deep changes that are relevant for R&I policy, including the following: ·The COVID-19 crisis is unprecedented and the world has been struggling to contain the pandemic. It has disrupted our lives, economy and society. While R&I is at the core of the response to the pandemic itself in the areas of virology, vaccines development, treatments and diagnostics (see Box 3 for a first coordinated response under the ERAvsCorona Action Plan), it will be crucial also in the economic recovery from the crisis, not only to spur economic activity, but also accelerate the twin transitions that our planet and society need - a new economy for health, wellbeing and equality in a broad sense (physical, mental, skills, gender, social, environmental and economic aspects). R&I can also help building system-wide resilience. Technologies already help alleviate, at least partially, the severity of the economic shock, with digital technologies being at the core of business continuity in several sectors. It is of paramount importance to invest in making our society and economy stronger, more resilient, sustainable and capable of a rapid and integrated response drawing on the latest scientific discoveries, ensuring equal access to healthcare, education and ICT across the EU, and social and economic support to its most vulnerable populations (Borunsky, Correia et al, 2020). Source: Science, Research and Innovation Performance of the EU, 2020 (European Commission, 2020) Box 3. ERAvsCorona The first ERAvsCorona Action Plan is a pragmatic and coordinated response to the Covid-19 crisis and results from dialogues between the Commission services and the national ministries. Also Associated Countries are consulted and contribute with concrete actions. It covers first short-term coordinated actions only. It sets out key measures the Commission services and the Member States are activating now to coordinate, share and jointly increase support for research & innovation, in line with the objectives and tools of the European Research Area. Coordination is also an important prerequisite for stepping up global cooperation, essential to tackle corona-related issues. It will be updated regularly by the Commission services and national administrations with other R&I coordinated actions that can be taken in the short, medium and longer term. It includes 10 priority actions for coordinated R&I actions: 1.Coordination of R&I funding against the Coronavirus 2.Extending and supporting large EU wide clinical trials for clinical management of Coronavirus patients 3.New funding for innovative and rapid health-related approaches to respond to coronavirus and deliver quick results relevant to society and a higher level of preparedness of health systems 4.Increasing support to innovative companies 5.Creating opportunities for other funding sources to contribute to R&I actions on Coronavirus 6.Establish a one-stop shop for Coronavirus R&I funding 7.Establish an ad-hoc High Level R&I Task Force on the Coronavirus 8.Access to Research Infrastructures 9.Research data sharing platform 10.Pan-EU Hackathon to mobilise European innovators and civil society

·Climate change poses an existential threat and requires enhanced ambition and greater climate action by the EU and at the global level . The past five years were the warmest on record. Global average temperature increased by 1.1°C above pre-industrial levels by 2019. The impacts of global warming are beyond dispute, with droughts, storms, and other weather extremes on the rise. We must take urgent and sustained action to preserve the health, prosperity, and well-being of people in Europe and all over the world. The recent reports of the IPCC on climate change and 1.5°C global warming, land, ocean and cryosphere underlined the dire impacts if climate change would not be halted. EU citizens are increasingly, and rightly, worried. Nine out of ten see climate change as a serious concern. A business-as-usual scenario, with continued pollution and greenhouse gas emissions, largely driven by economic and population growth, will lead to a further increase in global warming, ocean acidification, desertification and changing climate pattern. R&I as well as the development and uptake of eco-innovations will be key to achieving the climate goals. Yet, there is an overall decrease in national budgets devoted to R&I in clean energy technologies and a lack of national objectives and funding targets that show concrete and relevant pathways to 2030 and 2050. There is a need for a new strategic approach to clean energy R&I and competitiveness to rebuild the European economy and accelerate the innovation and market uptake of new technologies and innovation for climate neutrality. Developing low-carbon technologies and solutions for decarbonisation are needed – at affordable cost - to limit global climate change to well below 2 °C, pursuing efforts to limit it to 1.5 °C, and thus to mitigate the consequences of climate change, but also to ensure that Europe emerges as a technological and industrial leader in the green transition. R&I can provide a better understanding of the challenges related to climate change and the ongoing degradation of the natural environment, including loss of biodiversity. It can also provide better comprehension of the economic and social impacts of climate change, promote the shift from linear production to a circular economy, and support the development of inclusive solutions ensuring just transition to a resilient, climate neutral economy. Source: GECO 2018 (POLES-JRC 2018; MAGICC online) Note: The NDC scenario assumes that the global average rate of decarbonisation implied by the NDCs in 2020–2030 is maintained over 2030–2050. ·Digital technologies, including notably artificial intelligence (AI), are revolutionising at an unprecedented speed the way we live, work and innovate (Figure 6) and pose challenges in terms of data privacy and security. Digitalisation is also transforming R&I. All areas of research are becoming data-intensive, increasingly relying upon and generating big data. Technology, notably in the business-to-consumer (B2C) segment, is spreading faster than ever due to the transition from physical to digital goods combined with network effects in the age of digital transformation. The convergence of the digital and physical worlds is increasing innovation complexity and leading to deep-tech science-driven innovations (European Commission, 2020). There is increasing industry (sales) concentration and markups over time (in North America and to a less extent in Europe), not confined to digital-intensive sectors (Calligaris et al., 2018). Digitalisation is also having major educational and social impacts, demanding increased efforts in the development of digital skills, in particular women and girls’, and close attention paid to ensuring a just transformation, as well as unbiased and fair AI processes. Source: DG Research and Innovation, adapted from BCG (2015) and based on ITU (Telephone and Mobile phone), Scientific American (World Wide Web), Internet Live Stats, Fortune (iTunes), Facebook, Wired (Whatsapp), Techcrunch (Instagram), AppMtr.com (Candy Crush Saga), arinsider.co (Pokemon Go), Searchengineisland (Twitter). Note: iTunes: number of accounts; Facebook: monthly active users; Whatsapp: active users; Instagram: monthly users; Candy Crush Saga: Facebook users only; Pokemon Go: number of downloads; Twitter: active users; Skype: registered users. Note: The Internet was the driver of many developments in the digital sphere. ·People are increasingly worried that new technologies may exacerbate social and geographical inequalities through job and wage polarisation, income disparities, regional disparities, and ‘winner takes most’ markets and industries. Overall, compared to other countries, Europe is a relatively equal place to live. This situation is largely driven by Europe’s distribution of incomes and resources. Nevertheless, EU income inequality has increased during the last two decades (Figure 7) and the gender pay gap and gender employment gap remains significant including in R&I. These evolutions challenge the view that high competitiveness and strong investments in R&I automatically lead to more equality, driven by higher growth and more jobs with benefits for all. There is growing awareness that competitiveness and inclusiveness must go hand in hand. Recent evidence suggests that overly high levels of inequality are not economically, socially or politically sustainable (Iammarino et al., 2019; IMF, 2018; OECD 2019). If there is no diffusion of innovation, there is a risk that the benefits of innovation will be limited to skilled individuals, areas or companies with strong R&I assets. Evidence focusing on top income inequality and its interplay with innovation shows that technological change is associated with a higher share of income for the entrepreneur, at the expense of workers’ compensation hence increasing the top inequalities (Aghion et al., 2016). Source: Science, Research and Innovation Performance of the EU, 2020 (European Commission, 2020) based on Eurostat. Note: (1)EU is the weighted average of the values for the 27 EU Member States ·Another trend that directly relates to R&I is demographic change, in particular the EU’s ageing population. In 2018, 20% of the EU population was aged 65 years or over. By 2100, the share of people aged 80 years or more is expected to more than double, reaching 14.9% of the entire population . An ageing population is not a phenomenon specific to the EU as the entire planet is ageing. However, one continent stands apart: Africa, in particular sub-Saharan Africa, presents very young demographics and will be the demographic engine of the world in the 21st century (EPRS, 2020). This trend has several consequences for R&I. First, it means that R&I will be increasingly expected to address the need for ageing-related innovations, as ageing will involve changes in lifestyle and a growing demand for specific products and services. There will be a greater need for R&I to address ageing-related illnesses, support active ageing and foster technologies such as robotics and neurosciences which can provide support to the elderly . Second, productivity will need to increase to compensate for the declining share of the population in working age, together with inflows of high-skilled migrants, especially in the case of an ageing R&I workforce. Source: DG Research and Innovation based on Eurostat. Notes: (1)Provisions (2) Projections (EUROPOP2019). The Sustainable Development Goals provide an overarching framework for action to address these changes (Figure 9). In this framework, economic, social, and environmental sustainability aspects are not separate and build upon one another: a prosperous and efficient economy thrives within a healthy, inclusive and resilient society, and both depend on a healthy biosphere. The interconnected nature of these issues calls for a deep transformation of our systems, in particular agro-food, energy and transport systems. This sustainability transformation is an unprecedented governance challenge at all levels, from local to global. It results from the combined effect of the urgency, the scale of the necessary transformations, the complexity and the interdependence of issues in a context of fragility and unpredictability. It is essential that this transformation is founded on education that will empower and equip current and future generations with knowledge, skills, values and behaviours for sustainable development.

Source: Stockholm Resilience Centre R&I are key levers for the transformation required to address SDGs. It will need to interact with other levers, such as governance, economy and finance, and individual and collective action, in order to bring about this transformation (United Nations, 2019). Hence, R&I is a cornerstone for a robust European project in a global context that can accelerate the transition to sustainable development, while improving our well-being, reducing inequalities and ensuring longer-term prosperity: ·R&I is needed to produce novel solutions in areas like health, digital technologies, industrial transformation, resilient societies, natural resources, energy, mobility, environment, food, low-carbon economy and security. R&I solutions also enable both economic and environmental efficiency to be improved while developing new sustainable ways to satisfy human needs and wellbeing, in an inclusive manner, leaving no one behind. ·R&I helps to build the necessary knowledge and understanding of the phenomena to be addressed. ·R&I, in particular frontier research, can strengthen the resilience of our economy and society by building a reservoir of knowledge over the long term (Ricci et al., 2017). R&I can become a compass helping the EU to co-create a common route. R&I can also be the engine room for answers and solutions in the transformation towards sustainability, contributing to solving challenges at the global level. 2Setting objectives for R&I under ERA R&I policy plays a pivotal role in the transition towards competitive sustainability, in line with President von der Leyen’s Political Guidelines and the new strategy for Europe’s Growth laid out in the European Green Deal and elaborated in the New Industrial Strategy and the Digital Package. R&I acts both as driver and enabler for addressing the global challenges Europe is facing, and for grasping the opportunities ahead. A renewed transformative R&I policy could pave the way for sustainable, inclusive and competitive European societies and economies of the future. Indeed, a new strategic approach to clean energy R&I and competitiveness is needed to rebuild the European economy and accelerate the innovation and market uptake of new technologies and innovation for climate neutrality. Both EU and national R&I policies as well as funding and national industrial strategies need to be better aligned with energy and climate objectives. Recent literature shows there is increased awareness that a new R&I policy framework is required to bring the transformation needed to face the global megatrends that are changing our societies and economies at an unprecedented speed. Neither the ‘market failure approach’ rationale nor the ‘systemic failure approach’ that shaped traditional R&I policy – aiming at delivering economic growth and jobs – do allow to coordinate and drive the direction of change. While economic growth has substantially improved living conditions worldwide, lifting millions from poverty, it has often failed to be inclusive – leaving some people and regions behind (Iammarino et al., 2019; European Commission, 2020) or to respect the boundaries of our planet (Raworth, 2017). Similarly, the view that all innovations are necessarily good, i.e. leading to economic growth with benefits for the whole society, has proven to be misleading (Kalff and Renda, 2019). Therefore an R&I policy aiming at delivering accelerated transformative change to address social, economic and environmental challenges would need to strive for more than to provide a level playing field to and foster linkages between R&I performers (Biggeri and Ferrannini, 2020). A transformative R&I policy framework enables the shaping of technological and societal change, focussing R&I efforts on achieving sustainable development for all (Lundin and Schwaag Serger, 2018; Mazzucato, 2018; Biggeri and Ferrannini, 2020). A transformative policy framework aiming at achieving the SDGs, would foster a competitive economy, while preserving our planet and making sure not to leave anyone behind. This includes not only developing new solutions, technologies and inventions, but also changing production and consumption systems, including mobility, energy production, food and agriculture and other resources throughout society and industry (Schot and Steinmueller, 2018). A transformative framework presents several characteristics: ·Directionality. A transformative R&I policy framework identifies, shapes and adjusts the direction R&I efforts should follow to bring the transformative change required by the transition towards sustainable development. Tackling the grand challenges of our time requires a clear “design” process developed in the public sector, aimed at translating ambitions and aspirations in clear missions and pathways that will channel the allocation of resources. For example, missions define clear objectives providing the framework for R&I transformative policy actions, without being prescriptive in the way these objectives will be achieved by research innovative efforts (Mazzucato, 2019). ·Whole of governance approach. Ensuring that policies are aligned at different levels of governance) and across policy domains – i.e. a whole of government approach – is of paramount importance for an integrated transition towards sustainability and to ensure an EU-wide systemic change. This approach is in line with the principle of subsidiarity that the European Research Area was founded on. It would also ensure that R&I policy works in close synergy across all levels of government (local, regional, national and global), introducing initiatives with the most EU added value at the European level linked to and building on national and regional policy responses,. This would require a stronger governance framework to align and fully exploit the capacities and opportunities of action at every level of R&I policy. ·Experimentation, multidisciplinarity and foresight. Public institutions need to be flexible, experiment, anticipate and swiftly react to the challenges ahead. While there always will be need for evidence-based policy, transformative policymaking requires a different mindset to be able to create landscapes rather than purely fixing markets (Mazzucato, 2019). Policy actors will benefit from a multidisciplinary approach, while using strategic foresight to anticipate changes and experiment with new policy tools. ·Co-creation, learning and societal engagement (see also Box 4). A continuous engagement with civil society and the R&I community strengthens directionality and stimulates experimentation. It enables a collective discovery process that builds approved and achievable pathways to sustainability, thriving in diversity without looking for consensus (Schot and Steinmueller, 2018). While the identification of a direction takes place at the policy level, a transformative R&I policy is a larger partnership with citizens, stakeholders, industry and other actors. The move from communicating the research results and delivering innovations to an active engagement with society and industry allows for a better monitoring and assessment of policy design, implementation and results as well as delivering genuine social innovation (Mazzucato, 2019), including enhanced trust in new solutions. Box 4. Citizen’s engagement under the new ERA ·The Commission will organise with Member States and stakeholders Europe-wide participatory citizen science campaigns to raise awareness and networking, crowdsourcing platforms and pan-European hackathons, in particular in the context of Horizon Europe Missions. The Commission will develop with Member States best practices to open up science and innovation to citizens and youth. (Action 13 in the Communication)

Source: DG Research and Innovation, European Commission. So how can ERA help address these important challenges? In order to become transformative, ERA needs to both deepen and broaden its scope. Transformative R&I policy calls ERA to aim for four strategic and interdependent objectives, which are developed in the next sections: 1.Prioritising investments and reforms: an essential element of a transformative R&I policy will be to put in place the necessary tools for R&I to lead the way towards the green and digital transitions of Europe’s society and economy. 2.Improving access to excellence: competitiveness and inclusiveness are two sides of the same coin and must go together. A transformative R&I policy needs to embrace this and strive towards excellence by exploiting the full potential of the ERA, tackling existing R&I divides between and within Member States. 3.Translating R&I results into the economy: a transformative R&I policy needs to build on a competitive leadership in the global race for technology by fostering disruptive and breakthrough research and innovation that will contribute to a concept of competitive sustainability. 4.Deepening the ERA: R&I policy will not be able to drive the transformation of Europe if it does not manage to make decisive progress on deepening and completing the single market of knowledge in order to make it far more effective, efficient and creative. ERA will continue being underpinned by the principle of excellence. This means supporting the best R&I efforts to push out the frontiers of knowledge and ensuring that the best entrepreneurial minds can connect to the outcomes of research and turn them into innovations that are beneficial to our society and our economy in the most efficient way possible. Several instruments at the EU, national and regional level will contribute to implement a future transformative ERA (see Box 5).



Box 5. Instruments for a transformative ERA Different EU instruments will contribute to the development of a transformative ERA. Among them, the EU’s R&I Framework Programme is the main instrument for investing in R&I at the EU level and directing investment towards EU political priorities. There are also strong synergies between R&I policy and Cohesion policy, notably to address the R&I divide, roll-out and deployment through smart specialisation strategies. The following table highlights the main EU instruments that will support the transformative ERA. Instrument Link to R&I Budget 2021-2027 based on European Council agreement Investment Horizon Europe, including The main EU instrument for investing in R&I EUR 90.955 bn -Missions Providing direction to funding without prescribing the exact ways and means -European partnerships Providing a framework for programme level collaboration in the EU -European Innovation Council Supporting innovators with breakthrough ideas and market creating innovations -Widening Increasing the link of underperforming Member States with their better performing peers Euratom Research and Training Programme Developing comprehensive actions to support nuclear research and training activities EUR 1.981 bn Cohesion policy via European Regional Development Fund (ERDF) Supporting “A smarter Europe by promotive innovative and smart economic transformation” EUR 322.285 bn European Agricultural Guarantee Fund (EAGF) and European Agricultural Fund for Rural Development (EAFRD) Fostering and promoting the use, implementation and deployment of innovative solutions in agriculture, forestry and rural areas EUR 291.089 bn EUR 95.640 bn European Social Fund Plus (ESF+) Investing in human capital and skills development, as well as in social innovation EUR 99.261 bn Connecting Europe Facility (CEF) Supporting the deployment of innovative technologies in the fields of transport, energy and digital physical infrastructures EUR 12.830 bn (Transport) EUR 5.838 bn (Energy) EUR 2.065 bn (Digital) Erasmus+ Supporting mobility, cooperation and policy initiatives -that integrate higher education, research and innovation EUR 24.017 bn Just Transition Fund Ensure that the transition towards a climate-neutral economy happens in a fair way, leaving no one behind, supporting R&I investments that foster the transfer of advanced technologies EUR 19.321 bn European Space Programme Developing breakthrough solutions through research and innovation, in particular for sustainable food and natural resources, climate monitoring, smart cities, automated vehicles, security and disaster management. Contributing to the European Open Science Cloud EUR 14.880 bn InvestEU Fund Providing blended finance for innovators, where there is a high level of risk EUR 9.142 bn Internal Security Fund and the instrument for border management as part of the Integrated Border Management Fund Supporting the deployment of innovative new technologies and solutions in the field of security research EUR 1.931 bn (Internal Security Fund) EUR 6.248 bn (Integrated Border Management Fund) Digital Europe Programme (DEP) Ensuring a wide use of digital technologies across the economy and society and integrating digital across all the relevant policy fields EUR 7.588 bn European Maritime and Fisheries Fund (EMFF) Supporting the rolling out of novel technologies and innovative products, processes and services in the fields of marine and maritime policy EUR 6.108 bn Programme for Environment and Climate Action (LIFE) Taking up and applying R&I results for environment and climate policy and helping deploying them at national and regional scale EUR 5.432 bn Single Market Programme Promoting entrepreneurship and the creation and growth of companies EUR 4.208 bn Reforms European Semester Guiding investments and support the necessary reforms in Member States and regions. Policy Support Facility (PSF) Supporting policy mutual learning and helping Member States to improve their R&I policies and reform their R&I system Structural Reform Support Programme (SRSP) Helping EU countries to design and carry out structural reforms as part of their efforts to support job creation and sustainable growth Regulation Innovation principle Helping to ensure that EU legislation is analysed and designed so as to encourage innovation to deliver social, environmental and economic benefits A central part of the funding from Next Generation EU (EUR 750 bn) will consist in supporting public investment and key structural reforms in the Member States. This covers most notably the Recovery and Resilience Facility (budget of EUR 672.5 bn) that will fund Member States recovery and resilience plans. At the national level, most national public funding consists of ‘block’ funding to universities and public research organisations and only a fraction is in the form of project-based competitive funding similar to the EU R&I Framework Programme. Increasingly, Member States complement direct R&D funding with indirect support in the form of tax incentives to promote business R&D and stimulate innovation and economic growth (see section 2.1.1). The amount of foregone revenue varies across member states, ranging from 0.30% of GDP in countries strongly relying on tax incentives, e.g. France and Belgium, to shares below 0.01%, e.g. Sweden and Poland . Direct and indirect financing Grants and matching grants for innovation and/or R&D projects Vouchers for innovation and collaboration Loans & guarantees for innovation Tax incentives for R&D (e.g. tax credits) Equity finance for innovative enterprises Demand pull instruments Public procurement for R&D Pre-commercial procurement Supplier development programmes Corporate open innovation Technology adoption and generation instruments Business advisory services Technology extension services Technology centres Early-stage support for innovative ventures Incubators Accelerators Cooperation Supporting clusters and networks for innovation Framework conditions Inducement (incentive setting); recognition awards; appropriate IPR; standard setting; quality infrastructure; investing in education / skills; ‘green cards’ for highly skilled immigrants Source: EC-OECD STIP Compass, https://stip.oecd.org/stip.html 2.1Prioritising investments and reforms Box 6. ERAC opinion on prioritising investments and reforms The ERAC recommendation on the new ERA paradigm is to underline the importance of ambitious and sustained investments in R&I, possibly applying a ‘smart directionality’ policy approach for knowledge production and exploitation. It should embrace societal goals and place a greater focus on responsible use of knowledge and research results for societal purposes in order to ensure the long-term sustainability of national, including regional, R&I systems. What is it about? Steering and alignment of public and private investments with mission-setting and societal engagement in the definition of collective priorities is the starting point of transformative R&I policy in the SDGs framework (Schot and Steinmueller, 2018; Biggeri and Ferrannini, 2020). Such directionality, shaping the evolution of R&I pathways, needs to be based on sound evidence drawing from current and past trends or to be nurtured by foresight exercises (Schaper-Rinkel, 2013). This implies steering R&I activities in strategic technological fields to address specific challenges without prescribing the way they should be addressed. National funding targets should refer to concrete and relevant climate pathways to 2030 and 2050. The Commission proposed that Horizon Europe includes a 35% funding target for climate change, and that there is a substantial increase in investment in core digital technologies. Member States should consider replicating this ambition for green and digital investment in their national programmes. In this context, an agile, responsive and socially accountable transformative R&I policy must encompass the coordination of instruments, an alignment of objectives and the synchronisation of investments. In the European case, this calls for a partnership of the European Commission, Member States and Associated Countries and strengthened coordination between local, national and EU policies building on commonly agreed priorities. This translates into co-creation processes, which allow policy makers, stakeholders, citizens, industry and capital markets to ensure that a directional R&I policy foregoes costly solutions not delivering to societal needs. Box 7. National policy examples related to investment prioritisation Sweden In 2017, Sweden adopted a new climate policy framework that consists of a climate act, climate targets and a climate policy council. Sweden's long-term target is to have zero net greenhouse gas emissions by 2045 at the latest . The last national R&I strategy of 2016-2020 already aimed at directing 3% of total government budget allocations for R&D (GBARD) towards six prioritised areas, including “Climate” and “Sustainable Spatial Planning”. In 2015, Sweden allocated 1.5% of total GBARD to environmental topics. France A recent French law, 2019-1147 on energy and climate, in its article 1 aims to promote an R&I policy that favours the adaptation of business sectors to the energy transition . The French National Research Strategy 2015-2020, among its nine strategic areas, stipulates the priority of “Clean, safe and effective energy”. In 2015, environmental research in France accounted for 3.3% of GBARD, clearly above the OECD average of 1.7%. The Netherlands In 2019, the Dutch Cabinet decided to implement a mission-driven innovation policy. In total, eight ministries, together with entrepreneurs and knowledge institutions from nine selected sectors, have established 25 missions. These will strengthen the Dutch economy within four societal challenges: 1. Energy Transition & Sustainability, 2. Agriculture, Water & Food, 3. Health & Care, and 4. Security & Key Enabling Technologies. “Mission-Driven Top Sector Policy” was launched to work on concrete Knowledge and Innovation Agendas (KIAs), one for each of the challenges, and an additional one on key enabling technologies. On the basis of the KIAs, Knowledge and Innovation Contracts were drawn up. Germany In 2018, the German Federal Government has adopted its new High-Tech Strategy 2025 (HTS 2025). Since 2006, the High-Tech-Strategy defines the strategic framework of the Federal Government’s research and innovation policy. It has three fields of action, namely i) tackling societal challenges of our time, ii) developing Germany’s future competencies and iii) establishing an open innovation and venture culture. In the HTS 2025, the Federal Government has set six thematic priorities: 1. Health and Care, 2. Sustainability, Climate Protection and Energy, 3. Mobility, 4. Urban and Rural Areas, 5. Safety and Security, and 6. Economy and Work 4.0. Twelve missions have been set under the new HTS 2025. 2.1.1Facilitating EU and national investment towards the EU’s priorities

Indicator Latest value International comparison Trend Assessment of trend R&D intensity 2.19% of GDP (2018) Lower than US, JP and KR. Similar to CN. +1.3% per year since 2010 +1.4% per year since 2015 Business R&D intensity 1.45% of GDP (2018) Lower than US, CN, JP and KR +2.2% per year since 2010 +2.4% per year since 2015 Public R&D intensity 0.72% of GDP (2018) Higher than US, CN and JP. Lower than KR -0.2% per year since 2010 -1% per year since 2015 Government budget allocations for R&D (GBARD) 0.64% of GDP (2018) Lower than KR and JP. Higher than US. -1.6% per year since 2009 +0% per year since 2015 Tax incentives 0.106% of GDP (2017) Lower than KR and JP. Higher than US and CN. +4.9% per year since 2010 +6% per year since 2015 GBARD (EUR) allocated to Europe-wide transnational, as well as bilateral or multilateral, public R&D programmes per FTE researcher in the public sector 3120 (2018) / +2.8% per year since 2012 +0.6% per year since 2015 but SLOWDOWN 2.1.1.1Progress so far One of the key goals of the EU during the last couple of decades has been to increase the levels of R&D and innovation investment, to provide a stimulus to the EU’s growth and competitiveness . At the 2002 Barcelona Summit , the European Council agreed that the EU should set the objective of devoting 3% of its GDP to R&D activities by 2010. In 2010 this target became one of the five headline targets of Europe 2020 Strategy. Although R&D expenditure in the EU has been increasing annually by 1.3% since 2010, it remains lower than the 3% target, and visibly below the performance of most of its main competitors, especially in terms of private investments. At the EU level, R&D intensity increased from 1.97% in 2010 to 2.19 % in 2018, leading to a persistent EUR 110 bn gap vis-à-vis the 3% target (Borunsky, Dumitrescu Goranov, et at., 2020). Asian countries, in particular China and South Korea, are increasing their investments at a rate that is eclipsing both the EU and the United States. Similarly, the European companies among the top 2500 global industry investors in R&D have been losing ground to Chinese and US businesses on key future technologies, in particular in the digital sector (Hernandéz et al., 2019). At the national level, R&D intensity increased over the 2000-2018 period in 24 Member States (Figure 13) but significant heterogeneity persists across European countries. Only seven member states stand above the EU average intensity (Sweden, Austria, Germany, Denmark, Belgium, Finland and France). Source: DG Research and Innovation based on Eurostat Note: (1) EL, SE: 2001. HR, MT: 2002. EU business R&D intensity (at 1.45% of GDP) is significantly lower in comparison to other main economies. To promote business R&D and encourage innovation, apart from direct support in the form of subsidies and grants, governments are increasingly using R&D tax incentives. Total public support for business R&D increased substantially in the EU, from 0.13 % of GDP in 2007 to 0.2 % of GDP in 2017. Figure 14 shows that the level of public support for business R&D grew in most Member States between 2007 and 2017, particularly through the greater use of R&D tax incentives. In 2017, tax incentives for R&D in the EU accounted for 55 % of all public support for business R&D. The level of the forgone tax revenues in EU almost tripled since 2007, from 0.04 % of GDP in 2007 to 0.11 % in 2017. In the EU, the number of countries offering R&D tax relief increased from 12 in 2000 to 21 in 2018 (Appelt et al., 2019). Source: DG Research and Innovation, based on Eurostat and OECD

Notes: (1) Estimated direct public support for business R&D includes direct government funding, funding by higher education and public sector funding from abroad. (2)US: 2014 for tax incentives only; AU: 2015; FR: 2016 for tax incentives only; RO, UK: 2016; EL: 2015. (3)CH, TR: 2008; CN, MT: 2009; DE, EL: 2011. (4)The following countries have no tax incentives for R&D: BG, DE, EE, HR, CY, LU, CH. (5) Elements of estimation were involved in the compilation of the data. Direct project funding is used more often than other instruments to support R&I policies for sustainable development. In addition to direct measures, some countries are considering the possibility to use tax incentives to incentivise private actors’ behaviour towards SDGs. For instance, Belgium introduced a tax credit for environmentally friendly R&D investments . However, the tax incentives regime may make it difficult for governments to have the desired impact on steering private investment towards sustainability and systemic change. With a value of 0.72% of GDP in 2018, the EU has one of the highest public R&D intensities worldwide. Public efforts are of a critical importance. They raise the quality of public science and contribute to advance the overall stock of publicly available knowledge, leveraging and benefitting private investments, most notably in the more innovative and dynamic industries (Dosi and Stiglitz, 2014; Mazzucato, 2013; Archibugi and Filippetti, 2018). Public investments also demonstrate commitment to R&I as an engine of prosperity and affect the direction of further research. These positive effects of public R&D investments may rise the case for further increasing the current public R&D efforts in the EU. At the EU level, gross domestic expenditure on R&D (GERD) financed by public sector in 2017 was 0.7% of GDP. In addition, tax incentives accounted for 0.106% of GDP in 2017. Hence, publicly funded R&D in the EU equalled 0.81% of GDP in 2017. Already in 2009, in the Lund Declaration, the European Research Area was called to address grand challenges and to turn Europe into an eco-friendly economy. This became a second ERA Priority with a focus on transnational scientific collaboration to address grand socioeconomic challenges. The national GBARD allocated to EU-wide transnational public R&D has an annual growth rate of 2.8% in 2012-2018, resulting in more than 700 joint calls with a cumulative budget of more than EUR 7 billion in national investments since 2004. However, almost all countries have seen a slowdown in recent years. At the national level, many Member States have taken policy initiatives in support of R&I for SDGs. Many of these initiatives combine the objective of addressing sustainability challenges with strengthening industry competitiveness. In most countries, science, technology and innovation strategies address demographic change, health, environment, and smart transport and cities (OECD, 2018). Member States are slowly steering their finances towards societal and environmental challenges. Figure 15 shows an increase in energy-related R&D budget appropriations (GBARD) at the European level. Growth in the budget allocation for total civil, health and environmental-related R&D is more modest. In contrast, the R&D budget for defence has decreased significantly in recent years. Yet, most R&I strategies of Member States are not clearly linked to the SDGs Agendas, the Green Deal or other relevant EU priorities.

Source: Science, research and innovation performance of the EU, 2020 (European Commission, 2020), based on Eurostat. At the EU level, R&I plays a prominent role in the President’s Political Guidelines and in the European Green Deal as a driver and enabler of the economic, environmental and social transitions. President von der Leyen’s Political Guidelines call explicitly for the need to invest record amounts in R&I for Europe to become the world’s first climate-neutral continent and to achieve the Sustainable Development Goals (SDGs). The European Green Deal is the most prominent and important initiative to achieve these goals – it is the new European Strategy for Growth. The Sustainable Europe Investment Plan, which will trigger EUR 1 trillion of investments over the next decade, is a key component of this strategy. Moreover, the European Commission will develop an EU R&I investment agendas in areas with a focus on enabling better market uptake of innovative technologies and solutions. These agendas will encompass the whole set of funding instruments (from grants to financial instruments) and relevant EU programmes (e.g., the InvestEU Fund, VentureEU, the Digital Europe Programme, the EU Structural Funds, the Budgetary Instrument for Convergence and Competitiveness) in an integrated fashion, offering connections to national or regional funding. The vast majority of the Horizon 2020 programme investments foster the Sustainable Development Agenda. Potentially, 84% of the Horizon 2020 investments relate to at least one of the SDGs. Horizon Europe will put greater emphasis on directionality through Missions and European Partnerships, with the aim to prioritise R&I investments in areas of high EU added-value (Box 8). Additionally, the target for climate action is proposed to remain at 35%. The Knowledge and Innovation Communities (KICs) run by the European Institute of Innovation and Technology (EIT), also contributed to this agenda. Box 8. Approaches and modalities in Horizon Europe in support of directionality – Missions and European Partnerships Missions will provide direction to funding without prescribing the exact ways and means. Strongly factoring the SDGs into their design and implementation, missions will be excellence-based and impact driven R&I actions across disciplines and sectors. Horizon Europe introduces a limited number of R&I missions (e.g. on climate change, healthy oceans, climate neutral and smart cities, and soil health and food) to replace and build on the Horizon 2020 Focus Areas. Missions will be more closely co-designed with end-users and citizens, thus prioritizing public engagement and involvement. The mission-oriented approach will work across clusters to promote system-wide transformation (European Commission, 2018c). European Partnerships provide a framework for programme level collaboration in the EU. They allow to translate common EU priorities into concrete roadmaps and coordinated implementation of activities. A common R&I agenda, shared and committed by all partners in the partnership, is a key feature that distinguishes European Partnerships from other collaborative research instruments and places them in a unique position to address transformational failures. Partners can represent a broad range of public and/or private actors, such as research funders and organisations, universities, industry, bodies with a public service remit at local, regional, national or international level or civil society. Compared to the past , Horizon Europe introduces a more strategic approach to partnerships allowing a new quality in programme level collaboration and ensuring that partnerships are better equipped to deliver on EU priorities. To deliver on the EU-wide transitions, the Commission proposes to step up joint efforts in aligning investments by doubling the share of competitive R&I funding invested through R&I Partnerships in transnational calls by 2030. The Horizon Europe Part ‘Reforming and enhancing the EU research and innovation system” also opens up a possibility for programme level collaboration between research and innovation programme of Member States on priorities of their choice, with a clear focus on the implementation of transnational joint activities including calls. National funding targets should refer to concrete and relevant climate pathways to 2030 and 2050. The Commission proposed that Horizon Europe includes a 35% funding target for climate change, and that there is a substantial increase in investment in core digital technologies. Member States should consider replicating this ambition for green and digital investment in their national programmes. Finally, top industry R&D investors appear to be major players in the development of green inventions at EPO and USPTO. Based on the EU Industrial R&D Investment Scoreboard (Hernández et al., 2019), more than half (53%) of the still limited share (9%) of green patents registered at these offices between 2012 and 2015 belongs to the top R&D companies. Environmental regulations seem to play an important driving role also for top R&D investors. The intensity of green over total patents of these top players is the largest in regulatory driven sectors, such as transport-related industries. EU companies show comparative advantages in most green technologies, with the exception of ICTs for energy. 2.1.1.2Outstanding challenges Although the EU has not fulfilled its R&D investment ambition, the 3% target is a strong indicator within the European Semester that has provided a stimulus to EU’s R&I, growth and competitiveness policy. It is also an essential compass that can help accelerate the transition towards an environmentally, socially and economically sustainable Europe. Hence, continuation of the 3% R&D investment target and joint reflection with MS on the qualification of EU and national R&I investment targets is crucial. The EU R&D intensity would need to increase by 37% to reach 3% of GDP. Applying this increase to public R&D effort means that R&D public support, direct and indirect, would represent more than 1% of GDP. A whole of a government approach required by the transformative change and the transition towards sustainable development is a significant challenge for policy. Efforts to better coordinate relevant national policies and resources will need to be increased if maximum advantage is to be taken from a simpler and more impact-oriented EU R&I partnership landscape. This requires clear national governance structures and a robust and comprehensive framework for evaluating and monitoring the impact of P2P networks at national level,. Participation in transnational R&I initiatives, such as European Partnerships – precisely due to their cross-cutting nature – requires significant coordination effort across ministries and sectors to ensure a strong link between the common ambition and national policies. While countries have been taking steps to improve their participation, there are still important challenges such as securing funding, as the average annual investment in joint programmes and partnerships in the period 2015-2018 was just below 1% of total public funding for R&D in the EU. Other outstanding challenges include commitments and robust evidence on impacts, weak links with national policy priorities and end-users. Reducing the innovation gap between European regions is a key task of EU Cohesion policy, where in the 2014-2020 programming period about EUR 65 billion has been mobilised in support of R&I, which is about 30% of all Cohesion Policy funding. This was used to support the implementation of smart specialisation strategies that provide direction for R&I funding by exploiting the strengths and potential of the regions. Greater effort has been put into creating the eco-systems that encourage innovation, research and development and entrepreneurship by mobilising the quadruple helix. Besides investments efforts, the European Commission has refocused the European Semester into an instrument that integrates the SDGs , . The European Semester has increasingly recognised the role of R&I to stimulate productivity, economic growth and job creation in Europe. Integrating the SDGs could encourage Member States to foster the transition towards a sustainable economy and society underpinned by stronger investments in R&I and identifying country-specific R&I investment needs. The Recovery and Resilience Facility should also contribute to encourage Member States to undertake reforms and investments in new technologies and in a number of European flagships initiatives. 2.1.1.3Expected implications under a new ERA Actions under a new ERA The Commission: ·Proposes that Member States re-affirm the 3% GDP EU R&I investment target and update it to reflect new EU priorities, including a new EU 1.25% GDP public effort target to be achieved by Member States by 2030 in an EU coordinated manner, to leverage and incentivise private investments. (Action 1) ·Support Member States in the coordination and prioritisation of national R&I funding, and reforms, between countries and with the EU through dialogue and a dedicated ERA Forum for Transition. This will focus Member States common efforts, to voluntarily commit 5% of national public R&I funding to joint programmes and European partnerships by 2030. (Action 2) Expected implications: ·Increased impact on global challenges and EU policy priorities: Coordination and alignment of policies and investments will increase societal impact for end-users and citizens, by prioritising investments and setting directions to achieve the SDGs (European Commission, 2018c). R&I also holds an intergenerational responsibility: cooperation on concrete topics of technological innovation of low-carbon technologies, climate science and policies as well as adaption, amongst others, will not only contribute to global solutions, but also provide a basis for progressive exchanges between science and policy-making. ·More efficient EU R&I funding: the EU will increase the impact of its co-funding by focusing on the agreed EU strategic priorities, including Missions and European Partnerships. Hence the overall impact of EU R&I funding is expected to increase by leveraging additional investments on EU policy priorities, by providing ‘directionality’ to these investments, and by reaching out to a broader set of stakeholders, including investors seeking sustainable solutions and markets. ·Improved cross-sectoral and cross-disciplinary cooperation: The achievement of the ambitious goals of Horizon Europe, including its research infrastructures, missions and European Partnerships will require expertise from different sectors and disciplines to come together, resulting in system-wide transformation. For example, climate action requires meaningful collaboration across sectors such as urban planning, construction, energy efficiency in buildings, mobility, behavioural aspects, food, environmental capacity, and in many other areas (European Commission, 2018c). ·More links between science and society: R&I should mobilize citizens, local communities, stakeholders and users in their co-design and co-creation, building on already existing initiatives. Missions are a good way to mobilize citizens and promote experimentation. Also, R&I partnerships can act as experimental platforms to at the local level. This increases the relevance of science and innovation for the society and it can stimulate the societal uptake of innovative solutions and leverage business investment.

2.2 Improving access to excellence Box 9. Council and ERAC on improving access to excellence Council conclusions note with concern the unequal development across the European Research Area and in this context underline the need for making ERA better equipped to address the challenges. ERAC stresses that inclusiveness must be based on a broad understanding and applies with regard to geography, culture, people and institutions from academia, RTOs and industry as well as from the public sector and society. ERA policies and actions at all levels should increase inclusiveness, openness, brain circulation and integrity, pursuing scientific excellence throughout Europe. What is it about? There are concerns that changes in innovation dynamics coupled with changes on the labour market contribute to growing social and geographical inequalities. The observed changes are driven by technology-induced long-term structural changes, as well as cumulating skills gaps and mismatches accompanied by higher increasing income disparities and mobility of skilled professionals (Sekmokas et al., 2020). Moreover, economic activity and innovation have become more concentrated in core cities and regions, while others face difficulties to develop home-grown innovation and to maintain or strengthen the skilled labour force. Since the impact of these challenges on R&I systems varies across Member States, there is a need to devise different measures for strengthening excellence across the EU. Persistent challenges, such as various R&I performance across EU countries, regional-specific competitive advantages and synergetic approaches to R&I funding remain at the top of the agenda. In order to support innovation and growth in Europe’s countries and regions, the challenge remains to strengthen their competitiveness through smart prioritisation of R&I investments and to approach investment strategies with an inter-regional perspective. A broader strategic planning and implementation in synergy with other R&I relevant programmes, policies and activities at all levels has a potential to improve efficiency of R&I investments, strengthen excellence, and align actions with the broader goals of EU policy. On-going changes in the economy, transforming skills demand, coupled with slow reaction time in education and training systems may result in cumulating skills gaps and imbalances that require increased intersectoral mobility. This could be particularly the case when technological changes transform skills demand faster compared to supply-side changes. It may also happen when the changes between supply and demand are not fully symmetrical. In general, innovation patterns and economic performance across countries are determined largely by their ability to ensure overall high level of standard in the initial education as well as by effective workforce skills formation systems (Toner, 2011). Comparing the share of young individuals having a formal qualification with the share of ICT jobs suggests that only slightly over a third of ICT jobs are occupied by individuals with a degree in ICT. Even in countries with a large number of ICT jobs (i.e. Estonia or Sweden), there seem to be only relatively few individuals with ICT education (Figure 16). Source: European Commission, DG EMPL based on Eurostat (special extraction from EU LFS) Note: Comparison of shares of individuals holding a formal qualification with the share of ICT jobs (though limited to 15-34 year old job holders). 2.2.1Advancing Europe together Indicator Latest value Trend Assessment of trend Share of Horizon 2020 funding to Widening Member States 8.4% (2019) +1.9 p.p. since 2015 (6.5% in 2015) Seal of Excellence awards 209 (2019) +7.2% compared to 2015 Share of developing ESFRI Projects and operational ESFRI Landmarks in which a Member State/Associate Country is a partner 35% (2018) +15% since 2016 2.2.1.1Progress so far Increased inequalities as well as underperforming productivity and growth dynamics were among the main challenges on Europe’s political agenda in recent years. The outbreak of coronavirus and the resulting economic contraction will only underline the sheer magnitude of these challenges. The digital transformation of our economy and society coupled with strong and rising network effects lead to “winner takes all” dynamics. In particular, the tendency to concentration of innovative activities stands in contrast to the variety of European research and innovation systems, which have the potential to reduce the existing inequalities and reinforce complementarities across Europe. Nevertheless, to fulfil this potential and to advance Europe together, R&I systems need to maximise the effectiveness at all levels and strengthen their quality in a way that encompasses inclusiveness and collaboration. Low investments in intangible assets and low overall quality of the scientific and technological systems hinder strong innovation performance in many countries. Although some low-performing countries managed to increase their R&D investment, many of these rely predominantly on foreign financing and government financing, with weaker contributions from private R&D investments (European Investment Bank, 2018). The translation of R&D investment into high quality scientific and innovation output is lagging, for instance when compared the share of national scientific publications with the top 10% most highly cited publications. The low innovation performance caused by insufficient quality of innovation systems may further exacerbate due to limited availability of highly skilled or educated workers. About a half of Member States registered faster declines in university students between 2013 and 2017 than the EU average, in case of Central and Eastern European states due to weak demographic developments. (European Commission, 2020). Such developments pose a challenge to maintain and strengthen the skilled labour force, while further improving quality of scientific excellence and support home-grown innovation. Intra-EU differences persist in investments in the so-called “economic competencies”, which may hinder future productivity developments and exacerbate innovation inequalities (European Commission, 2020). The shares of investments in economic competencies show wide intra-EU disparities with investments above 3 % of GDP between 2009 and 2017 in the Netherlands, Belgium, and Ireland and shares of investments below 1.5 % of GDP in Croatia, Spain and Greece. An assessment of the bottlenecks to firm investments in the lowest-investing countries is crucial to boost both absorption capacity and the uptake of new, productivity-enhancing technologies both in research and innovation activities. Differences in the take-up of digital technologies also persist across countries, industries and firms. Slightly more than 1 in 10 enterprises in the EU performed big data analyses as part of their work in 2018. In Malta, the Netherlands, Belgium and Ireland, 20 % or more of all enterprises performed some sort of big data analysis, while in Cyprus, Austria and Hungary, less than 7 % of enterprises did so (Eurostat). In most Member States, big data practices seem less diffused, and with differences by firm size, with large companies clearly making more use of big data analytics than medium-sized and, in particular, small firms. 26 % of EU enterprises used cloud computing in 2018, mostly for e-mail and storage of files (Eurostat). However, EU disparities are quite significant, ranging from over 55% uptake in Finland, Sweden and Denmark, to less than 15% in Latvia, Greece, Poland, Romania and Bulgaria. Economic activity and innovation have become more concentrated in core cities and regions, which could potentially lead to a less economically and socially cohesive Europe. Capital cities are then the headquarters for large organisations and tend to have a relatively high concentration of graduate jobs in dynamic or well-paid areas (Eurostat, 2019). Many of the new jobs were created in new industries, e.g. the number of jobs in the ICT sector for the period 2010-2017 increased by 72 % in Bucharest, 31 % in Berlin and 27 % in Stockholm. Metropolitan areas in general tend to offer environment conducive to the introduction of new ideas, products and processes (European Commission, 2017). The divide is most apparent in the increasing gap between capitals and metropolitan areas, where most of economic and innovative activities are concentrated, on the one hand, and declining industrial and peripheral areas experiencing skilled emigration and being less resilient to change, on the other hand. Participation patterns in the EU R&I Framework Programme suggest a concentration of funding that may slow down countries and regions in their efforts to narrow the R&I gap between countries: ·An analysis of the network of participations across Framework Programmes (European Commission, 2018d) shows a very dynamic structure, which is gradually opening towards the participation of newer Member States and where the most connected countries are also the largest ones. Although the participation network is becoming relatively open, there is still room for improvements in connectivity and centrality of several countries with lower R&I performance (European Commission, 2018b).

·Newer Member States currently represent 8.3 % of the participations in Horizon 2020 and receive 5.6 % of the overall funding, which shows a slight improvement from the 7th Framework Programme with 7.9 % of participations and 4.2 % of funding. Insufficient R&D investment levels, lack of synergies between certain Member States’ research systems and EU research, limited access to existing networks or differential wage levels between countries belong to the main causes of low participation(European Commission, 2017a). Targeted widening actions, consisting of Teaming, Twinning and ERA Chairs, COST networking actions and MSCA Widening Fellowships, are in place to increase the link of underperforming Member States with their better performing peers through activities, such as short-term staff exchanges, network seminars or communication activities as well of the development of new or modernisation of existing centres of excellence. Ongoing projects capitalise on countries’ individual strengths with the objective of allowing the European Research Area to function in a more efficient and homogenous way (European Commission, 2019). Furthermore, widening countries received 1065 ‘Seal of Excellence’ quality labels that help proposals to find funding elsewhere and thus support synergies with other funding programmes. Other instruments target low-performing countries and regions by dedicated activities. European Institute of Innovation and Technology (EIT) developed an outreach strategy through Regional Innovation Scheme (EIT RIS), which is carried out through the activities of the knowledge and innovation communities (KICs). Its main objective is to support countries and regions that lag behind in innovation performance by strengthening their capacity for innovation and by bringing the EIT model to these regions. As part of the actions aiming at increasing the regional impact of KICs in Horizon Europe, Regional Innovation Scheme activities shall become mandatory in Horizon Europe and an integral part of the KIC’s multi-annual strategy. Source: European Commission, DG Research and Innovation- R&I Strategy and Foresight Unit, based on Corda. 2.2.1.2Outstanding challenges Box 10. Examples of synergies ·The Bayerische Forschungsallianz (BayFor), a public body in Bavaria (DE) provides comprehensive advisory services on EU research and innovation funding, helps putting together applications and looks for suitable project partners in order to achieve potential synergies. BayFor has succeeded in supporting H2020 applications in combination with regional research and innovation programmes through the European Structural and Investment Funds (ESIF) in connection with Smart Specialisation Strategies (S3). It has ensured cooperation and coordination among different ERA-NETs and/or JPI to increase synergies between cross-cutting issues. Finally, it has fostered synergies between BBI JU actions and regional spending activities under ESIF as well as opportunities given by public financial instruments (e.g. EIB). ·The projects JIVE and MEHRLIN run in parallel and work in close cooperation to promote, deploy and commercialise hydrogen as alternative fuel, contributing to the European alternative fuel implementation strategy. This effort to develop hydrogen buses (JIVE) and refuelling stations (MEHRLIN) includes operating real-pilot hydrogen refuelling stations at seven locations along four Core Network Corridors of the trans-European Transport Network (TEN-T). Most of the buses co-funded under JIVE will refuel at stations co-funded under MEHRLIN. The JIVE and MEHRLIN projects will deploy in total 144 hydrogen fuel cell buses and seven large-scale hydrogen refuelling stations across five EU countries, more than doubling the number of fuel cell buses operating in Europe. While both project received EU funding (below) the project mobilised additional fund through national funding programmes, regional and local funding and the city of Riga secured European Investment Bank financing. ·JIVE project: €32M from the FCH2 JU under the EU Horizon 2020 ·MEHRLIN project: €5.5M from the Connecting Europe Facility The key challenge is to address the differences in innovation performance across Europe, which requires long-term national and regional strategies that would maximise synergies. Since 2007, a number of instruments targeted reinforcement of R&I capacities in low performing countries. The main expected outputs from these activities related to improved institutional, scientific and networking capacities of centres of excellence and research institutions. Specific measures introduced by Horizon 2020, such as teaming (aiming at institution-building) or twinning (aiming at networking) increased the attractiveness of the participating institutions for international excellent researchers and boosted its capability to compete for international funding. Furthermore, instruments such as the Policy Support Facility provided on-demand advice to policy makers on national R&I systems and thus allow to strengthen framework conditions for R&I. Horizon Europe should reinforce the European Research Area through continuation of all these activities that pursue sharing of excellence together with research and innovation policy reforms (European Commission, 2018c). Moreover, increased synergetic approach to other EU funding programmes and EU policies could particularly capitalise on R&I capacities built over the past decade in low performing countries. This requires combining resources in support of activities promoting human capital development, introduction of innovative technologies and new business models as well as supporting infrastructure maintenance and development. An effective combination of the ERDF innovation investments under the smart specialisation priorities with world-class research and innovation initiatives supported by the Framework Programme could significantly improve the performance of lagging regions and strengthen the European Research Area as a whole. Cohesion policy