Opinion of the Economic and Social Committee on the 'Green Paper on innovation`

(96/C 212/12)

On 12 January 1996, the European Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the 'Green Paper on innovation`.

The Section for Energy, Nuclear Questions and Research, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 14 May 1996. The Rapporteur was Mrs Sirkeinen and the Co-Rapporteur was Mrs Konitzer.

At its 336th Plenary Session (meeting of 30 May 1996), the Economic and Social Committee adopted the following Opinion by 127 votes to 5, with 3 abstentions.

1. Introduction

1.1. Innovations are the foundation of sustainable economic growth, social and ecological development and growing prosperity. They better satisfy the needs of the individual and society by means of new and improved products, methods and services. In addition to bringing new products to the market, innovations are a prerequisite for more efficient public services, better working conditions, improved competitiveness in traditional industries, environmental protection, richer leisure time, etc.

1.2. There is a strong positive correlation between innovations and employment. In the short term changes generated by innovations may cause some social problems. These should be duly taken into account and it should be endeavoured to solve them using mechanisms which rely on participation and negotiation. The overall effects are, however, positive and vital for the development of society.

1.3. Innovation is a highly complex process. Besides R& TD, many other factors and right conditions are needed, and it is only through their interaction that results are generated. Innovation is essentially a social process the starting point for which is the quest for development, competition and a favourable attitude towards change and risk taking and the result of which is better competitiveness and an increase in cohesion and economic and social welfare.

1.4. According to various indicators, there are notably fewer innovations in Europe than in other advanced economic regions.

1.5. According to the fourth indent of Article 130(1) of the Treaty on European Union, Community and Member State action to ensure the conditions necessary for the competitiveness of the Community's industry is aimed at 'fostering better exploitation of the industrial potential of policies of innovation, research and technological development`.

1.6. In its White Paper on growth, competitiveness and competition, the Commission notes that firms' capacity for innovation is an essential requirement for competitiveness and employment. Innovation capacity also occupies a prominent position in the 1994 Communication from the Commission on an industrial competitiveness policy for the European Union and in the reports of the Competitiveness Advisory Group.

1.7. The Economic and Social Committee has set out its views on innovation in numerous Opinions. In particular, mention can be made of the Opinion on the specific programmes for implementing the fourth framework R& TD programme () and the Opinion on the coordination of research and technological development policies (). The present Opinion draws on the Committee's previous Opinions but for practical reasons and the sake of readability they are not normally referred to in the text.

1.8. At least in terms of academic measures, the level of research activity in EU Member States is good, being comparable with that of their main competitor, the United States, and superior to that of Japan. Nevertheless total financing of R& D activities is notably lower than in these countries. The principal problem, and the most striking difference in relation to the United States and Japan, is, however, the poor performance in transforming research results into commercially successful innovations and thereby into economic growth and jobs.

1.9. In Europe, SMEs, which generate the vast majority of new jobs, are all too rarely founded on original ideas and innovations. Consequently, they are not being set up in sufficient numbers, their growth performance is poor and hence not enough new jobs are being created. Many studies indicate that problems exist especially in marketing and product development.

1.10. The vast majority of innovations are born in the market. Firms play a key role in this process. Moreover, a product or service innovation in a firm is often an essential component of or impulse to an innovation in public services. The task of the authorities is to create conditions which are conducive to innovation. The authorities need innovations themselves as they are responsible for, inter alia, the modernization of public services.

1.11. In particular, the authorities should endeavour to orient and coordinate policies in a fashion that promotes innovation at all levels. There is a need for close interaction between the authorities, on the one hand, and firms and research establishments, on the other. In addition, the authorities should foster an open public debate on issues concerning the future and reconcile any differences of opinion that this may give rise to.

1.12. Public intervention in the market is only justified where there are clear shortcomings in its operation. Important market failings as far as innovation is concerned are lack of strong incentives for firms to accept the risks inherent in undertaking investments in the application of the results of R& D, especially where the initial costs may not be recouped for some years, and inadequate demand signals, often in the provision of public services, in important sectors such as the environment, health and public transport.

2. Gist of the Commission proposal

2.1. The Green Paper seeks to identify the factors - both positive and negative - which influence innovation in Europe and to formulate proposals for measures for improving the European Union's innovation capacity. Innovation is understood to mean the successful production, assimilation and exploitation of novelty in the economic and social spheres.

2.2. The Green Paper is set out as follows:

2.2.1. The introduction discusses the importance of innovations and the role of different groups in society, especially the business sector and the authorities, in their generation and exploitation.

2.2.2. Chapter II analyzes in more detail the factors and conditions that affect the generation of innovations and the effects of innovations on the economy and welfare. The analysis concludes with a closer examination of the rules of play that it is necessary to apply in order to stimulate innovation: competition which is effective and conducive to innovation and effective legal protection.

2.2.3. Chapter III reviews the situation in Europe as regards innovation, noting that it varies greatly between countries, regions, firms and sectors. It then goes on to describe the steps taken by the European Union to promote innovation and increase convergence.

2.2.4. Chapter IV describes the main obstacles to innovation in Europe, including problems with financing, the need to develop a legal and regulatory environment which nurtures innovation, deficiencies in developing human resources and difficulties in orienting research towards innovation.

2.2.5. Chapter V gives recommendations for routes of action. The basic objectives of these recommendations are as follows:

2.2.5.1. To better direct research efforts towards innovation. To achieve this it is necessary:

- to increase the capacity to anticipate technical progress, markets and competitors, i.e. technology monitoring and foresight (route of action 1) and 'economic intelligence` actions (route of action 11);

- to develop and coordinate research efforts in firms (in line with the activities of the Community Task Forces on joint projects of industrial interest). Projects and programmes should be assessed with particular regard to their relevance for innovation (route of action 2);

- to facilitate social acceptance of new technologies and change (route of action 5).

2.2.5.2. To reinforce human resources for innovation. This implies in particular:

- developing initial and further training. There should be ongoing training in enterprises, especially SMEs, recognition of skills acquired 'on the job` and closer links between educational and training establishments and firms (route of action 3);

- encouraging the mobility of students and researchers, not only within the Community, but also within each country, between universities, research centres and firms (route of action 4).

2.2.5.3. To improve the conditions for financing innovation. This requires:

- mobilization of private capital for innovation, and, in particular, for new high-tech firms (route of action 6);

- analysis of the means available to Member States for establishing a fiscal regime beneficial to innovation (route of action 7).

2.2.5.4. To establish a legal and regulatory environment favourable to innovation. In some cases this means adapting existing regulations (simplification of administrative procedures, legal forms of cooperation). In other cases it is merely a question of publicizing the regulations and the opportunities they offer (standards, intellectual and industrial property, competition) and promoting their use (routes of action 8, 9 and 10).

2.2.5.5. To make the role and modalities of public action more favourable to innovation. This requires:

- vigorous action to promote innovation and the absorption of new technologies in SMEs. The regional dimension of innovation should be reinforced (route of action 12);

- a clear commitment to simplifying administrative procedures and streamlining administrative formalities (route of action 9);

- action to increase the coherence and coordination of public intervention and private efforts, foster dialogue and consensus-building, and support dissemination of good practices (route of action 13).

2.3. The Green Paper has four annexes. Annex 1 describes the Commission's seven task forces. Annex 2 contains a list of innovation relay centres. Annex 3 is a simplified research contract for the fourth framework programme. Annex 4 contains relevant tables and statistical data.

2.4. The Green Paper seeks to stimulate a wide-ranging debate on these themes among the various players in private and public organizations, the regions and the Member States. The aim of this debate is to check the accuracy of the diagnosis, to specify the priorities and select and refine the proposed actions. At the end of the consultation process, the Commission will, if necessary, draw up an action plan for submission to the other institutions. The Commission presumes that the action plan will not give rise to the need for additional funding.

3. General comments

3.1. The comprehensive approach employed by the Commission seeks to cover all the factors influencing innovation, i.e. the entire innovation system. Although very challenging, this is the right approach to take and is to be welcomed. Urgent action is needed to address problems associated with competitiveness, employment, the environment and other social developments in Europe.

3.2. Many of the ideas and proposals contained in the Green Paper have been put forward previously by the Commission in various contexts. Often the presentation and analysis have reflected the narrow viewpoint of the parties directly concerned. The global approach applied in the Green Paper offers an opportunity to examine these issues from a wider perspective. Therein lies its greatest challenge. A horizontal, integrated approach is essential if innovation policy is to succeed. Decision-makers should give the first priority to fostering innovation as it is the key to better competitiveness, jobs and greater prosperity. All political decisions affecting the preconditions for innovation should be examined from this viewpoint. Any negative effects that decisions might have on innovation should be investigated during the decision-making process. For example, it should be ascertained whether a change in the fiscal regime will have an adverse or favourable impact on the willingness and capability of firms to take risks.

3.3. In order to increase innovations Europeans must develop their own model. To compete successfully on global markets, Europeans must, despite the heterogeneity of their continent, be able to work together and create Europe-wide networks. Division of labour and cooperation between the regional, national and Community levels, i.e. subsidiarity, is of utmost importance because innovation is by nature a decentralized activity. Innovations are also key factors as regards economic and social cohesion. Models developed in other parts of the world cannot be applied directly in Europe, but Europe should learn from the experience of others by analysing the instruments used and their effects.

3.4. The key areas of the innovation system can be grouped together as follows:

3.4.1. Appropriate orientation of the entire research system and the resources at its disposal. A certain amount of curiosity-oriented research is essential as it is a source of new ideas and stimulates people's imagination. But apart from this, the fundamental problem remains of how to direct research to fields and projects which are relevant to society and offer potential for exploitation.

3.4.1.1. Technology foresight and monitoring occupy a key position in this respect.

3.4.1.2. There must be greater reliance on a bottom-up approach and more attention should be paid to the needs of users in planning the allocation of research resources. This also implies the need for a shift of emphasis in the EU's framework programme towards competitive research. The Committee has addressed these issues in its Opinion on the coordination of research and technological development policies, in which it also proposes large industrial association projects as a possible model.

3.4.1.3. The Commission pays considerable attention to the transfer of research results to firms and other users. This will be facilitated if the problem of orienting research can be resolved.

3.4.2. Interaction between researchers and users. This is hampered by formal and intellectual barriers and cultural differences. The capacity of users, i.e. in the first place firms, to exploit research must be good and basically this only comes about through their own R& D work. Education and training also play a vital role.

3.4.3. Factors conducive to commercialization. These include the ease of setting up business, availability of venture capital, protection of industrial rights, openness of markets and free competition.

3.5. Taken as whole, the Member States of the European Union devote less resources to R& D than their main rivals. Global competition is also sharpening competition to be the first to introduce new products onto the market. This implies the need for more spending on development work.

3.6. A more important issue than the quantity of resources, however, is how effectively they are used. Here again Europe does not perform well. From the point of view of innovations, the productivity of resources devoted to precompetitive research is poor if an unduly large proportion of resources is channelled to fields and projects whose potential for exploitation is weak, as seems to be the case in Europe judging from the results.

3.7. Resources should be concentrated in fields and projects which are essential for the development of Europe. Efficiency can be improved by increasing interaction between different organizations. The work of the task forces on joint projects of industrial interest is a welcome experiment in this respect. However, there is still room for improvement as regards selection of target areas and procedures. The target areas should be genuine European projects, not projects specific to some particular Member State.

3.8. Conditions favouring innovation come about as a result of locally integrating firms, research centres and other factors on a scale that is large enough to generate 'critical mass`. Technological villages and science parks are successful examples of such innovation networks. This is an obvious area for action by the EU and the structural funds. The examples and experience of more prosperous regions should be utilized.

3.9. SMEs have great potential for innovation but they often lack the necessary resources and their know-how is limited to a too narrow area. One of the aims of innovation policy should be to improve the opportunities of the most poorly equipped firms to join innovation networks.

3.10. Regardless of the size of an enterprise, the participation of all its employees in the innovation process is necessary. Key factors are further training, a climate which is open and conducive to cooperation, flexibility and incentives.

3.11. The Green Paper contains a comprehensive analysis of the factors influencing innovation. The Committee nevertheless wishes to draw attention to three issues:

3.11.1. Systematic evaluation of the legal and regulatory framework. The existence of many different types of legislation in Europe, especially as regards standards, affects the preconditions for innovation. Every proposed change in legislation should therefore be assessed particularly with regard to such effects.

3.11.2. The need to create demand in sectors important for society but where the market itself does not necessarily generate demand. Examples of such sectors are the environment, public transport and health. This subject is touched upon in the Green Paper but it merits greater attention. In the view of the Committee, it should be endeavoured to establish a common European strategy in these sectors and apply the Task Force model of the fourth framework programme.

3.11.3. Market rigidities. There are still serious obstacles to the dynamic introduction of new products and services, examples of which include protection of certain fields of activity from competition, other constraints on competition and shortcomings in the operation of the internal market. The Committee has dealt thoroughly with the problems of the internal market in several of its Opinions and is continuing to pursue its work on this issue.

3.12. In addressing the issues, it is important to retain the entire innovation system in all its complexity as a frame of reference. However, in drawing up the action programme it is necessary for practical reasons to focus on target areas and establish priorities for them. In the view of the Committee, the selection criterion should be the importance and urgency of the problem in question. However, the EU's programme should give first priority to those issues that fall within the remit of the authorities and which are most affected by action at EU level.

3.13. In the view of the Committee, among the most important areas for action are orientation of research - which is supported by technology foresight - education and training, financing, taxation, openness of markets and dissemination of innovations to SMEs.

3.14. The Committee endorses the Commission's presumption that the implementation of an action programme based on the Green Paper would not necessarily require additional funding. At both national and EU level, this implies reorientation of existing actions, redefinition of priorities and coordination rather than new action programmes or measures. However, the Committee feels that it is necessary to allocate additional funding to the dissemination and exploitation of R& D results within the fourth framework programme.

3.15. In the view of the Committee, it is essential that the Commission take appropriate organizational decisions concerning its own operations so as to ensure the synergy between research, industrial and other policies that is needed for policy and measures to be directed towards promotion of innovations.

3.16. The Committee thinks that the Green Paper stresses cooperation between research institutes and firms. Rightly so. But this fails to take a number of factors into account.

3.16.1. The cooperation between a firm's various departments is of great significance for a firm's innovative capacity. The cooperation between the product development and commercial departments is for example crucial.

3.16.2. A firm's innovative capacity can be increased by giving greater priority to improving the quality of work for employees. Continuing education and proper worker empowerment on the basis of a labour contract are important preconditions for increasing innovative capacity.

3.16.2.1. A firm's staff policy, which must include staff planning, development and promotion, will become more important in future for its innovative capacity.

3.16.3. The Green Paper makes the assumption that mobility contributes to innovation. The Committee would like to point out that a distinction should be made here between internal and external mobility. External mobility is relatively high in the EU, in comparison with Japan and the USA for example. Internal mobility on the other hand is very low. Excessive external mobility curbs investment in staff and thus a firm's innovative capacity. It is therefore very important that high priority be given to improving the quality of work to reduce the pressure to seek employment outside the firm.

4. Detailed comments

4.1. On the whole, the Committee concurs with the description and analysis presented in Chapters I-IV of the Green Paper. As noted above, the Committee endorses the Commission's comprehensive approach. Despite its concise form, the Green Paper is well written and maintains a coherent picture throughout the analysis of the many forms and levels of innovation. The examples cited shed further light on the issues addressed.

4.2. Mainly in order to avoid repetition, the Committee focuses its detailed comments on Chapter 5 'Routes of action`. The comments below also apply, mutatis mutandis, to the analysis of these issues in other chapters.

4.3. Route of action 1 (Technology foresight)

- The Committee has touched upon the issues dealt with here in its Own-initiative Opinion on the coordination of research and technological development policies ().

- As regards technology foresight, it should be stressed that, in addition to the activities of the Seville Institute for Prospective Technological Studies (ITPS), the EU should encourage the work of leading institutes active in this field in Member States as well as cooperation between them. To this end, the Commission should set up forums for the exchange of information and cooperation between national institutes.

4.4. Route of action 2 (Orientation of research)

- The Committee wishes to underline the view it expressed in points 3.4.1, 3.5 and 3.6 that orienting research towards innovation is one of the most crucial issues for the innovation system. The Commission's proposals for action at national and EU level should be endorsed.

- Efforts to better direct research towards innovation should take the form of cooperation between the various players. The Committee expects that the proposal for industrial association projects it put forward in its Opinion on the coordination of research and technological development policies will be adopted by the Commission as a point of departure in developing ways of involving users in the orientation and implementation of research.

- The Committee would reiterate the view expressed in point 3.11.2 that the authorities have the right and obligation to intervene in the orientation of research, particularly in sectors important for society, such as the environment, public transport and health, where the market itself would not necessarily generate demand. Consideration should be given to the use of task force-type activities, with precedence being given to these sectors.

- In order to make the preparation and orientation of EU's framework programme for research more effective and to achieve necessary flexibility, a reform of the decision-making procedure should be considered. To facilitate participation by firms, especially SMEs, in the programmes and improve the exploitation of results, procedures should be simplified and speeded up in a purposeful fashion. The Committee also refers here to the ideas set out in its Opinion on the specific programmes for implementing the fourth framework programme for research ().

4.5. Route of action 3 (Initial and further training)

- The Committee would reiterate the remark made in point 1.3 above that innovation is essentially a social process and would underline that innovation is not merely a question of technology and organization but is founded upon human resources. In order to develop these resources, education and training should also be geared to promoting innovation. The emphasis should be on developing innovative skills and creativity and on understanding the role of innovation strategy. Greater attention should be paid to teaching the exact sciences.

- The basic problem for education and training is how a growing number of people can quickly acquire the latest knowledge and skills required by changing job patterns when these requirements cannot be predicted very far into the future.

- The structure and contents of occupations are changing rapidly and this calls for greater readiness for change. More and more people must be prepared - and have the opportunity - to participate in further training after their initial education and training.

- Active participation by workers at all levels is essential for innovation. In particular, this calls for work organizations which are innovative and based on participation as well as for the development of workers' creative potential. The aim should be to create a culture of ongoing improvements.

- Learning situations are assuming increasingly many forms, implying the need to create qualification systems which are independent of education and training provided in establishments. The Commission's task here is to ensure comparability between Member States and offer a forum for cooperation between the parties involved in developing such systems at national level.

- The Committee believes it would be worthwhile to launch the Knowledge Resource Centres project proposed by the Competitiveness Advisory Board, the purpose of which is to act as an interface between the supply of and demand for information in the field of education and training. The Commission could provide financial support to the project during the experimental stage.

- In developing and implementing training programmes, especially those intended for SMEs, the starting point should be the needs arising from changing job patterns referred to above. Another task of training should be to make it easier for workers to move from one job to another within the same firm, without, however, impairing their mobility.

4.6. Route of action 4 (Furthering the mobility of students and researchers)

- There is too little mobility, particularly between different sectors - e.g. between universities and enterprises - and within individual countries. This problem is largely due to internal structures and traditions in Member States, but the Commission should take account of it, at least in formulating its own programmes.

- There should be a system for recognition of know-how acquired outside formal education.

- The Committee is not convinced that honourable awards such as 'research worker of the year` would motivate the people of today but they could lead to greater prominence and respect for research.

4.7. Route of action 5 (Promoting recognition of the benefits of innovation)

- The Committee endorses the Commission's proposals in general. Member States have different traditions and cultures, and hence the starting points are different. Some countries and regions have traditionally been very receptive to new technologies and innovations have quickly found their way on to the market. In other countries the opposite is true. Any campaigns to heighten public awareness should be based on a thorough understanding of the factors involved.

4.8. Route of action 6 (Improving the financing of innovation)

- The Committee considers financing to be of primary importance for the promotion of innovations. In the later stages of the innovation process the presumption should be that funds are raised from private sources on market terms so as to avoid distortion of competition. In that case, the task of the authorities, including the Commission, should be to ensure that generally favourable conditions exist for the financing of innovations. In the earlier stages, however, a certain amount of public support, both direct and indirect, is needed because market forces do not function in a way that takes account of the general interest of society. As small firms, in particular, encounter many kinds of financial difficulties in Europe, various means should be used to help put SMEs on an equal footing with large firms on the financial markets. The Committee endorses the Commission's proposals for tackling this problem.

- An essential requirement for improving innovative firms' access to financing is the development of risk-evaluation systems for intangible investments. Similarly, risk-taking and risk-sharing mechanisms for these investments must be developed among investors.

- As far as the proposals are concerned, it should be borne in mind that all levels are required: for small firms just starting up local financial assistance is often the only suitable form, taking into account EU legislation. The creation of contacts and networks between different levels and players should be facilitated.

4.9. Route of action 7 (A fiscal regime conducive to innovation)

- The Committee endorses the Commission's view that a thorough study needs to be made of possible measures in the fiscal area. In addition, the Committee would particularly stress the need mentioned in point 3.2 to consider at the decision-making stage any negative effects that a decision, for example a proposed reform of the fiscal system, may have on innovations.

- The primary objective should be to ensure that firms have a sound capital structure and adequate self-financing because heavily indebted firms cannot invest in risky, innovative projects with long lead times. It would be more advantageous for both tax authorities and firms to increase the opportunities for setting up reserves. This would not entail any easing of taxation but merely postpone the time of taxation.

4.10. Route of action 8 (Promotion of intellectual and industrial property)

- A European patent system should be introduced because at present patent costs are higher in Europe than in competitor countries. The system should be designed so that it is economically advantageous to users, inter alia with regard to translation requirements, by, for example, applying models used in connection with public procurement. In addition, the rules governing legal proceedings should be transparent and inspire confidence.

- As far as exploitation of research results is concerned, there is a clear need to harmonize arrangements for the transfer of rights.

4.11. Route of action 9 (Simplification of administrative procedures)

- This issue has been the subject of much discussion. Numerous programmes have been drawn up and political commitments made. It is high time that these were translated into concrete measures at national and EU level.

- Simplification of the administrative procedures related to the EU's framework programme for research are dealt with in point 4.4.

4.12. Route of action 10 (A favourable legal and regulatory framework)

- The Committee calls upon the Commission to take greater account of innovation needs in EU competition policy. Of paramount importance from the point of innovations, however, are the effectiveness of competition, the efficient functioning of the internal market and the demands imposed by global markets.

- The Committee endorses the Commission's proposals for using public contracts to promote innovations.

- EU standards concerning health, safety and environmental protection should be strict and binding. As regards implementation, the Committee endorses the Commission's view that the proposed strategy, comprising the 'new approach`, opportunities for voluntary standardization and voluntary agreements and quality management, is more likely to promote innovation than a system based on detailed regulations and inspections.

4.13. Route of action 11 (Development of 'economic intelligence` actions)

- This is essentially a question of the professional skills of business management and key persons. The Committee therefore feels that the task of the authorities is mainly to facilitate more education in this area.

4.14. Route of action 12 (Encouragement of innovation in enterprises, especially SMEs, and strengthening of the regional dimension of innovation)

- The issues falling under this heading are at the very heart of a well-functioning innovation system, and the Committee has already made repeated references to them in its general comments. They call for implementation of economic and social cohesion as a key objective of the EU and subsidiarity as its guiding principle.

- The Committee endorses the Commission's proposed measures.

- The Committee would further stress that lack of resources for marketing and product development is a major problem for SMEs. Technology transfer, i.e. exploitation of technologies developed elsewhere, is the cheapest and most practicable solution for most SMEs. The authorities should promote technology transfer, for example by providing firms locally with assistance in analysing their needs and finding solutions.

- Cooperation with large firms involves risk for small firms but also offers them opportunities to compensate for their shortcomings, especially in marketing.

4.15. Route of action 13 (Updating public action for innovation)

- Most of the actions proposed under this heading are also dealt with by the Commission under other headings. The Committee therefore refers to its comments elsewhere in this Opinion.

- By way of a general comment, it can be noted that the authorities still have a role to play in today's Europe but the nature of this role and hence the actions that it calls for are changing. Instead of setting rules and supervising compliance, public actions are increasingly being directed towards cooperation with different segments of society.

5. Conclusions

5.1. In the view of the Committee, the publication of the Green Paper on Innovation is important because:

- innovations are the foundation of competitiveness, employment and economic and social development;

- innovations pave the way for ongoing cohesion;

- innovation is an extensive, decentralized process comprising many elements and should be approached on the basis of the subsidiarity principle, albeit in a coordinated fashion.

5.2. Innovation is essentially a social process which is based on creativity, know-how and competition and which requires the cooperation of all those involved. Innovative training and work organization are of key importance here.

5.3. Innovations occur mainly in firms. Many factors in many policy areas contribute to the generation of innovations. The primary task of the authorities is to create conditions that are conducive to innovations and, if necessary, to support their generation where market forces fail to do this to a sufficient degree. This requires that the Commission and the governments of the Member States make innovation a priority and coordinate their decisions so that they foster, rather than weaken, the opportunities for innovation.

5.4. In the view of the Committee innovation can be best promoted by:

- orienting research towards sectors and projects that offer potential for innovations;

- improving the conditions of SMEs so as to enable them to participate fully in innovation and market networks and to apply research results, which is a key issue for cohesion;

- systematically assessing the legal and regulatory framework from the point of view of innovations;

- ensuring that the internal market functions effectively; and

- gearing education and training to the needs of innovation; and ensuring that adequate financing is available and that the fiscal regime is beneficial to innovation.

5.5. The Committee urges the Commission to take immediate action on the basis of its action programme. Actions and resources must be reoriented in a way that promotes the European innovation system and network. Priority should be given to measures that are the most urgent and which most clearly fall within the remit of the authorities and the Commission. Synergy between the Commission's various policies is essential for the achievement of results.

Done at Brussels, 29 May 1996.

The President

of the Economic and Social Committee

Carlos FERRER

() OJ No C 393, 31. 12. 1994, p. 117; OJ No C 388, 31. 12. 1994, p. 29; OJ No C 295, 22. 10. 1994, pp. 74, 77 and 80.

() OJ No C 18, 22. 1. 1996, p. 54.

() OJ No C 393, 31. 12. 1996, p. 117; OJ No C 388, 31. 12. 1994, p. 29; OJ No C 295, 22. 10. 1994, pp. 71, 74 and 80.

APPENDIX to the Opinion of the Economic and Social Committee

The following amendment based on the Section Opinion was rejected:

Page 6, paragraph 3.4.1.2

Delete the first sentence and insert the following text:

'In the allocation of research resources, the primary objective must be to ensure that the benefits go to the potential users or customers. There should also be a recognition of the potential gains in competitiveness for the producers or providers of services.`

Reason

To emphasize the orientation to customers but acknowledge the incentives for producers or providers of services.

Result of the vote

For: 23, against: 48, abstentions: 10.