COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT integrating ex-ante evaluation requirements
Date: 2011-11-30
Institutions: European Commission
Subjects: EU financing, EU office or agency, EU research policy, co-financing, higher education, innovation, research and development, research body

EUROPEAN COMMISSION 

Brussels, 30.11.2011 
SEC(2011) 1433 final 

COMMISSION STAFF WORKING PAPER 

IMPACT ASSESSMENT  
integrating ex-ante evaluation requirements 

Accompanying the document 

Proposal for an amended Regulation of the European Parliament and of the Council on 
the European Institute of Innovation and Technology 

{COM(2011) 817 final} 
{COM(2011) 822 final} 
{SEC(2011) 1434 final} 

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TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

Procedural issues and consultation of interested parties .............................................. 3 

Organisation and timing............................................................................................... 3 

Consultation and expertise ........................................................................................... 4 

1.2.1.  Public consultation on the future of the EIT ................................................................ 4 

1.2.2.  EIT evaluation.............................................................................................................. 5 

1.2.3.  External study............................................................................................................... 5 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

2.7. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

4. 

5. 

5.1. 

5.2. 

5.3. 

5.4. 

5.5. 

6. 

6.1. 

6.2. 

Context and problem definition ................................................................................... 5 

Political context............................................................................................................ 5 

Background .................................................................................................................. 6 

Synergies and complementarities................................................................................. 7 

Problem definition........................................................................................................ 9 

Underlying drivers of the problem............................................................................... 9 

Implementation issues................................................................................................ 12 

Baseline ...................................................................................................................... 13 

Objectives................................................................................................................... 14 

Review of EIT’s objectives........................................................................................ 14 

General objectives...................................................................................................... 14 

Specific objectives ..................................................................................................... 15 

Operational objectives................................................................................................ 15 

Policy options............................................................................................................. 16 

Analysis of impacts .................................................................................................... 19 

Assessment challenges ............................................................................................... 19 

Selection of future priority fields ............................................................................... 20 

Budgetary and funding assumptions .......................................................................... 21 

Most relevant economic, social and environmental impacts ..................................... 23 

Analysis of the more significant impacts by option................................................... 24 

Comparing the options ............................................................................................... 27 

Effectiveness of options - Strengths and weaknesses by Option ............................... 27 

Effectiveness, efficiency and coherence .................................................................... 30 

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6.3. 

6.4. 

7. 

Risks associated with policy options.......................................................................... 33 

Identification of the preferred option ......................................................................... 35 

Monitoring and evaluation ......................................................................................... 35 

7.1. 

The EIT monitoring and evaluation system ............................................................... 36 

Glossary.................................................................................................................................... 39 

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1. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

1.1. 

Organisation and timing 

The  European  Institute  of  Innovation  and  Technology’s  (EIT)  is  an  independent  and 
decentralised  EU  body  with  full  legal  personality.  Its  mission  is  to  reinforce  the  innovation 
capacity of the Member States and the EU, by promoting the integration of higher education, 
research  and  innovation  of  the  highest  standards.  The  EIT  Regulation1  is  a  framework 
regulation,  setting  out  the  principles  for  the  EIT  functioning  on  a  long  term  perspective. 
Following the EIT Regulation, the EIT has submitted its Strategic Innovation Agenda (SIA) 
proposal – a policy document outlining the future priority fields of the EIT and an indicative 
financial  plan  covering  the  period  of  the  next  financial  framework  –  to  the  Commission  in 
June 2011 (for more detail check 2.2). 

Following the provisions laid down in the EIT Regulation on the SIA, discussions within the 
Commission  in  the  second  part  of  2010  confirmed  the  necessity  for  a  dedicated  impact 
assessment on the EIT. In November 2010 DG EAC took the decision to establish an Impact 
Assessment  Steering  Group  (IASG).  The  IASG  has  been  convened  for  the  first  time  in 
January  2011  and  consists  of  representatives  from  DG  ENER,  DG  ENTR,  DG  ENV,  DG 
INFSO, DG REGIO, DG RTD, JRC, SG and SJ. The IASG has been actively involved in the 
work  and  contributed  substantially  on  aspects  such  as  the  options  identification,  the 
framework  for  priority  fields,  the  problem  definition  and  the  objectives.  The  IASG  was 
consulted on the external study supporting the impact assessment. Overall, the IASG met four 
times (January 2011, May 2011, July 2011 and August 2011). DG EAC's reflections on the 
impact  assessment  were  informed  early  on  by  a  preliminary  assessment  of  possible  future 
options for the EIT, which DG EAC contracted to the external evaluator of the EIT and which 
was prepared by January 2011.  

The impact assessment was submitted to the Impact Assessment Board on 7 September 2011, 
the IAB Opinion was issued on 7 October 2011. The recommendations of the IAB expressed 
in the IAB Opinion have been incorporated into this IA:  

The revised impact assessment expands the information on the the EIT , its activities (current 
and planned) and  the KICs, by including  fiches on  each KIC. It has  clarified  the  context of 
complementarity  by  concrete  examples  and  a  separate  detailed  Annex.  Critical  mass  and 
problem  definition  have  been  clarified  and  reflected  in  the  revised  operational  objectives  of 
the EIT. The findings of the evaluation have been further emphasised. Budget breakdowns of 
the policy options have been included and the  funding  model  of  the  KIC  explained.  A  KIC 
budget  illustration  for  2011  was  added.  An  Annex  assessing  the  economic  impacts  (supply 
and  demand  side)  of  the  options  has  been  included  in  order  to  better  analyse  cost  and 
effectiveness. The monitoring and evaluation provisions have been clarified and spelled out, 
also by describing current instruments. A Glossary was added.  

1

Regulation (EC) No 294/2008 

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1.2.  Consultation and expertise 

1.2.1.  Public consultation on the future of the EIT 

In  respect  of  the  Commission's  standards  on  consultations,  DG  EAC  has  launched  an  open 
public consultation (OPC) on the EIT in April 2011. The OPC has been published online2 and 
announced  through  different  channels  (DG  EAC  website,  EIT  website,  collective  and 
personalised  mailings,  related  conferences  and  meetings).  It  ran  until  30  June  2011  and  has 
generated  134  responses  through  the  online  questionnaire  and  46  position  papers.3 
Contributions were received from a wide range of stakeholders from different countries, the 
highest  numbers  coming  from  the  higher  education  and  research  sectors,  followed  by  the 
business sector and public administration. The majority of respondents were from the EU-15 
countries.  

According  to  the  results  of  the  consultation,  there  is  a  very  strong  level  of  support  for  the 
EIT's  mission  and  its  underlying  concept  of  a  balanced  and  integrated  approach  to  the 
knowledge  triangle.  The  EIT  should  preserve  its  distinctive  role  within  the  forthcoming 
Common  Strategic  Framework  for  Research  and  Innovation  (Horizon  2020)  and  maintain 
strong  links  to  the  European  Higher  Education  Area.  It  should  also  seek  to  generate  and 
demonstrate complementarities with other European and national policies. Future KIC priority 
fields should contribute to addressing the societal challenges indentified under Horizon 2020. 
Business  participation  is  highly  relevant  for  the  success  of  EIT's  KICs.  In  order  to  attract 
private sector  participation, flexibility  and clarity on  the applicable rules  are necessary. The 
consolidation of the three existing KICs by providing tangible results and concrete benefits to 
society is considered as important as the designation of new ones. Through dissemination and 
outreach  EIT  should  promote  new  models  of  knowledge  sharing  and  open  innovation.  The 
impact assessment reflects the results of the consultations most closely in the development of 
Options, Objectives and the Monitoring and Evaluation provisions where the need for a sound 
monitoring system for the EIT is reflected. 

The results of the public consultation on the Common Strategic Framework for EU Research 
and  Innovation4  (CSFRI)  on  what  regards  the  EIT  were  also  taken  into  consideration.  The 
consultation  revealed  there  is  strong  support  for  placing  EU  funding  for  research  and 
innovation close to societal challenges. Excellence should continue to be the key criterion for 
distributing EU research and innovation funding. There is strong support for the EIT concept 
and its inclusion in "Horizon 2020", combined with the request for demonstrating that KICs 
can deliver tangible results and benefits to the business sector. EIT should maintain a strong 
link  to  the  European  Higher  Education  Area  (EHEA).  There  is  a  need  to  embrace  a  broad 
concept of innovation including non-technological and non research based innovation.  

The results of both consultations have thus confirmed EIT's mission and concept as laid down 
in the EIT Regulation. 

2

3

4 

http://ec.europa.eu/education/eit/eit-consultation_en.htm 
Papers  from  contributors  who  have  agreed  to  be  published  and  the  report  on  the  public  consultation  can  be  accessed  at  the 
following URL: http://ec.europa.eu/education/eit/eit-consultation_en.htm 
The  consultation  ran  from  09.02.2011  to  20.05.2011.  The  summary  of  the  report  is  published  at 
http://ec.europa.eu/research/horizon2020/pdf/consultation-
conference/summary_analysis.pdf#view=fit&pagemode=none  

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1.2.2.  EIT evaluation 

The first external evaluation of the EIT was completed on May 31st 2011 by ECORYS.5 The 
evaluation  found  that  the  EIT  has  succeeded  in  achieving  its  milestones,  notably  by 
establishing three KICs, which successfully integrate the three dimensions of the knowledge 
triangle: business, education and research. The concept of integrating the knowledge triangle 
is regarded as highly relevant and the priority fields around which the EIT is structured are 
well-received.Results are not yet available for the activities undertaken by the KICs owing to 
the fact that KIC started their operations in the course of 2010. To date, the development of 
the EIT has, broadly, been effective, efficient, and relevant and demonstrates EU added value. 
The  broad  model  and  structures  remain  appropriate  and  gradual  expansion  of  the  EIT  is 
supported. There are particular challenges emerging in terms of governance and the role of the 
EIT Headquarters. A stronger emphasis on monitoring is also recommended. In going forward 
the evaluation highlights the need for the EIT to be more open and the need to consider ways 
in which the benefits of its  experience can promote the  development  of innovation  capacity 
across the EU as a whole. The results of the evaluation have provided an important impetus in 
the description of the baseline, the identification of the objectives, the design of the Options, 
the challenges identified with the implementation of the EIT as an agency and the monitoring 
architecture.  

1.2.3.  External study 

The  work  on  the  impact  assessment  has  been  supported  by  a  study  prepared  by  an  external 
contractor,  carried  out  between  March  2011  and  July  2011.  The  same  contractor  has 
completed  the  first  external  evaluation  of  the  EIT  in  May  2011.  Results  of  the  study  are 
reflected  mainly  in  the  following  sections:  Problem  definition,  Objectives,  Analysis  of 
Impacts and Comparison of Options. 

2. 

CONTEXT AND PROBLEM DEFINITION 

2.1. 

Political context 

The EU2020 strategy for smart, sustainable and inclusive growth puts innovation at the heart 
of  the  EU  policies.  The  EIT  is  fully  anchored  in  the  context  of  the  EU  innovation  policy 
agenda,  and  in  particular,  addressing  smart  growth  via  knowledge  and  innovation,  and 
strengthening of knowledge triangle policies, notably education, skills and entrepreneurship.  

In  its  Common  Strategic  Framework  for  Research  and  Innovation  (Horizon  2020),  the 
Commission identified three complementary and interlinked pillars: Excellence in the science; 
Tackling  societal  challenges;  Creating  industrial  leadership  and  Competitive  frameworks. 
The promotion of innovative education and entrepreneurial mindsets is a particularly unique 
dimension and the main contribution of the EIT across the three pillars of Horizon 2020. As 
part of Horizon 2020, the EIT has been framed within the pillar Tackling societal challenges, 
through  its  innovation  activities  and  knowledge  triangle  integration.  However,  given  its 
integrated,  cross–cutting  nature,  synergies  should  also  be  sought  with  other  pillars,  in 
particular the "competitiveness" pillar. 

5

The full report can be found on: http://ec.europa.eu/dgs/education_culture/evalreports/education/2011/eitreport_en.pdf  

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The impact assessment of Horizon 2020 confirmed the considerable synergies potential of the 
EIT within the EU research and innovation landscape. The Horizon 2020 impact assessment 
identified the preferred option of full integration of FP7, CIP and EIT into a single strategic 
framework  to  enhance  synergies  and  the  impact  of  EU  action.  This  option  would  achieve 
critical mass, foster excellence and allow for more flexibility. The conclusions of the Horizon 
2020  impact  assessment,  notably  on  synergies,  policy  alignment  and  monitoring  and 
evaluation arrangements are taken into account in this document. 

Apart from its prospective alignment within Horizon 2020, the EIT is reflected in the EU2020 
and in key flagships and initiatives such as the Innovation Union Communication6, the Youth 
on the Move Communication7, the Modernisation of the Higher Education Agenda8 and the 
Commission's Regional Policy communication on smart growth9  

2.2. 

Background 

The EIT was set up to fill a gap in the European landscape and with a clear objective: promote 
innovation  via  the  full  integration  of  the  knowledge  triangle  (research,  education  and 
business).  The  EIT  is  a  novel  initiative  at  EU  level  that  explicitly  links  the  full  innovation 
cycle  from  education  and  knowledge  creation  to  new  market  opportunities  and  business 
creation.  The  EIT  is  characterized  by  two  main  principles:  a  highly  independent  EIT 
organisation,  (neither  the  Commission  nor  representatives  from  the  Member  States  are 
members  of  the  EIT  Governing  Board)  which  organizes  the  selection  process  of  KICs, 
coordinates  them  with  a  flexible  framework  and  disseminates  best  governance  and  funding 
models  from  the  KICs;  and  autonomous  KICs,  which  define  their  internal  organisation, 
composition, agendas and working methods. The value of this bottom-up model was subject 
to  an  impact  assessment  in  2006  and  has  been  confirmed  by  the  outcome  of  the  open 
consultation and the experience gained in the first two years of the EIT's activities.  

As an EU body, and in contrast to programs, the EIT implements its activities notably via the 
KICs,  which  are  integrated,  long-term  partnerships,  set  for  a  period  between  7-15  years, 
spanning over various financial frameworks. KIC have legal status. The first three KICs have 
been selected in the fields of climate change adaptation and mitigation (ClimateKIC), future 
information and communication society (ICT Labs) and sustainable energy (InnoEnergy). The 
KICs are presented in more detail in the Annexes.  

The EIT regulation was adopted in March 2008, the EIT Governing Board was established in 
September 2008, the first KICs were designated in December 2009, and the first seven year 
partnership  agreements  concluded  a  year  later  –December  2010.  In  this  period  of  time  in 
place,  the  EIT  has  completed  its  initial  phase,  which  was  dedicated  to  setting  up  the  EIT 
decision  making  and  executive  functions  –  Governing  Board  and  Headquarters  –  as  well  as 
the  operational  arm,  the  KICs.  It  has  also  set  up  the  EIT  Foundation,  a  philanthropic 
organisation  dedicated  to  supporting  the  work  and  activities  of  the  EIT.  The  EIT  is  now 
consolidating itself. 

The EIT has a EU budgetary contribution of €309m for the period 2008-13. The EIT has fully 
absorbed  the  amounts  allocated  in  2009  and  2010  (5,6  million  and  26  million  respectively) 

6 
7 
8 
9 

http://ec.europa.eu/research/innovation-union/pdf/innovation-union-communication_en.pdf#view=fit&pagemode=none 
http://ec.europa.eu/education/yom/com_en.pdf 
http://ec.europa.eu/dgs/education_culture/evalreports/education/2011/eitreport_en.pdf 
European Commission (2010), http://ec.europa.eu/regional_policy/sources/docoffic/official/communic/smart_growth/comm2010_553_en.pdf 

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and  is  expected  to  fully  commit  the  55  millions  allocated  in  2011.  This  is  an  important 
milestone,  considering  the  large  volume  of  carry-overs  and  cancellations  of  operational 
appropriations of EU agencies especially in during their first years of existence. Legal basis 

The  third  paragraph  of  Article  173  of  the  Treaty  of  the  Functioning  of  the  European  Union 
provides the legal basis for the EIT Regulation. Article 173 (3) allows the Council, acting in 
accordance  with  the  procedure  referred  to  in  Article  294  and  after  consulting  the  Economic 
and  Social  Committee,  to  decide  on  specific  measures  in  support  of  action  taken  in  the 
Member States aimed at fostering a better exploitation of the industrial potential of policies of 
innovation, research and technological development. 

2.3. 

Synergies and complementarities  

Synergies are defined here as the alignment of and cooperation between policy frameworks, 
programmes  and  actions  allowing  more  and  better  attainment  of  their  objectives.  The  inter-
relationships  between  research,  innovation  and  education  are  increasingly  being  recognised 
within  EU  initiatives  and  programmes.  While  many  programmes  address  the  research  and 
innovation facets of the knowledge triangle, the EIT is so far the only initiative that has the 
explicit mission of addressing all of the three. In practise, while there is limited overlap with 
other EU programmes, there are many areas where actions could be mutually reinforcing.  

Examples of the synergies between KIC and other instruments have been recently praised in 
DG  RTDI  Synergies  report.  The  report10  illustrated  this  on  the  example  of  EIT  ICT  Labs 
which liaises and works closely with the Future Internet PPP, the Artemis JTI and EUREKA 
initiatives such as ITEA (Information Technology for European Advancement). By applying 
KIC "catalysts" such as the Innovation Radar to existing research projects, ICT Labs boosts 
the  market  impact  of  EU  funded  research  projects.  In  a  similar  vein,  KIC  InnoEnergy 
contributes to the delivery of the EU's Strategic Energy Technology Plan (SET Plan), through 
inter alia,  its  participation  in the SETIS platform on  technology  watch  and  mapping.  It  also 
currently  interacts  with  the  Commission's  Joint  Research  Centre  (JRC)  for  the  simulation 
capabilities  in  building  scenarios.  Climate  KIC  has  the  potential  to  provide  overarching 
synergies  between  the  upcoming  Joint  Programming  Initiatives  on  "Connecting  Climate 
Knowledge  for  Europe"  "Urban  Europe"  and  "Water"  as  well  as  with  upcoming  European 
Innovation  Partnerships  (EIPs)  in  these  areas.  Climate  KIC  Regional  Innovation  and 
Implementation  Communities  (RICs)  provide  an  original  pan-European  regional  innovation 
model, which uses regions as test beds, linking up the development of managerial capability 
and regional strengths to global challenges. 

The  upcoming  European  Innovation  Partnerships  (EIPs)  will  promote  an  overarching 
framework to promote the alignment and synergies among existing supply and demand-driven 
research  and  innovation  instruments  and  policies.  KICs  have  a  strong  potential  to  identify 
policy, regulatory or standardisation issues having an impact in the market, making them key 
players in the EIPs. Moreover, the EIT will complement ERC investment on frontier research 
by  addressing  the  whole  innovation  chain  from  ideas  to  application  and  exploitation  and 
provide  additional  opportunities  in  innovation  and  exposure  to  entrepreneurship  to  Marie 
Curie and Erasmus Mundus students 

10 

Final Report of the Synergies Working Group, June 2011, ftp://ftp.cordis.europa.eu/pub/fp7/docs/seg-final_en.pdf 

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The  EIT  will  contribute  to  achieving  the  objectives  of  Horizon  2020.  It  will  primarily 
"respond to key societal challenges", by promoting innovation via the seamless integration of 
the knowledge triangle. It will also "boost competitiveness through technological leadership 
and  innovation",  by  stimulating  results-driven  research  and  fostering  the  creation  of  high 
growth innovative SMEs. Finally, it will contribute "to strengthen the scientific foundation for 
innovation", by fostering mobility across boundaries –discipline, sector and country- and by 
embedding  entrepreneurship  and  a  risk-taking  culture  in  innovative  post-graduates  degrees. 
The  EIT  has  a  particular  contribution  to  make  to  the  objectives  of  Horizon  2020  via 
innovative,  entrepreneurial  education,  playing  an  important  bridging  role  between  the 
research and innovation framework and education policies and programmes. In this context, 
the EIT will contribute to achievements of the European Higher Education Area. In particular, 
through  new,  trans/interdisciplinary  EIT-labelled  degrees,  the  EIT  is  leading  a  collaborative 
effort towards education for innovation with clear spill over effects on the broader European 
agenda for the modernisation of higher education institutions.  

Last  but  not  least,  the  EIT  can  contribute  to  the  Cohesion  Framework  by  addressing  the 
linkages between the local and global aspects of innovation. Co-location centres provide for 
cross-border collaboration within and outside of the KIC networks and are well positioned to 
capitalise and benefit from various funding schemes from their respective regions. Via the co-
location  centres,  the  EIT  and  KICs  have  a  strong  territorial  impact  and  offer  an  important 
element of European added value next to the development of smart specialisation and clusters. 

EIT added value: The EIT evaluation suggested that the integration of the knowledge triangle 
is beginning  to  demonstrate a  number of potential  efficiency  gains.  The  European  nature  of 
the EIT offers a strong element of EU added value. Although this can be replicated by other 
groupings  of  organisations,  they  do  not  have  the  same  institutional  dimension.  Existing 
interventions at EU level seeking to promote stronger collaborative activity tend to focus on 
bilateral  arrangements  rather  that  the  tripartite  collaboration  required  for  integrating  the 
knowledge  triangle.  Many  of  these  arrangements  also  tend  to  be  project  specific.  There  is 
some evidence of individual MS undertaking actions promoting stronger collaboration within 
their  own  borders,  but  these  remain  isolated  examples  which  are  poorly  integrated  at  a 
European level.  

• 

• 

• 

• 

• 

Overcoming  fragmentation  via  long-term  integrated  partnerships.  Building  on 
existing cooperation initiatives, the EIT brings the selected partnerships in the KICs 
to a more permanent level.  

Towards  critical  mass  through  its  European  dimension.  The  KICs'  co-location 
centres offer strong local actors the opportunity to closely connect to other excellent 
partners  

Fostering entrepreneurship through knowledge triangle integration: Entrepreneurship 
is fostered through a new generation of students and education course 

Nurturing  talent  across  borders:  The  EIT  provides  new  career  paths  between 
innovative  schemes  for  professional 
academia  and 
development.  

the  private  sector  and 

Experimental  character  The  EIT  has  been  equipped  with  a  substantial  degree  of 
flexibility to test out new innovation models; 

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• 

Funding through leverage The EIT provides 25% of the KICs budget and catalyzes 
75% of financial resources from a wide range of public and private partners;  

Box: Elements for creating European added value from the EIT 

2.4. 

Problem definition 

A number of challenges and barriers continue to inhibit the innovation capacity in Europe and 
its  ability  to  tackle  complex  societal  challenges  in  a  sustainable  way.  The  EU’s  innovation 
system  underperforms  some  of  EU’s  major  competitors  and  this  has  implications  for  the 
continued  competitiveness  across  the  EU.  This  underperformance  is  also  contributing  to  an 
under-investment  in  those  services,  products  and  processes  which  are  required  to  meet 
societal  challenges.  The  relatively  poor  innovation  performance  of  the  EU  economy  on 
aggregate  is  well  known  and  was  clearly  set out  in  the  first  EIT  Impact  Assessment11.  This 
analysis  remains  valid.  The  EU  continues  to  experience  a  relatively  weak  level  and 
concentration of investment in higher education and R&D and the exploitation of knowledge 
and R&D results into economic growth and employment remains comparatively low. Where 
relative performance is strong, these places form ‘islands’ of activity within a wider 'sea' of 
underperformance. The fragmentation of research and innovation capacity is a key weakness 
in securing a more globally competitive offering for the EU economy. There is also a strong 
risk  that  emergent  economies  will  begin  to  challenge  the  EU  as  a  location  of  research, 
innovation activity and  investment. This  has social and environmental implications and will 
ultimately  impact  on  the  well-being  of  citizens  across  the  EU  and  may  also  have  economic 
implications in so far as EU firms and institutions fail to invest in future market opportunities.  

EU  policymakers  have  recognised  the  importance of  societal  challenges  (as  reflected  in  EU 
2020 and associated flagship initiatives). Ensuring that research being undertaken is translated 
into  products  and  services  which  serve  to  address  the  societal  challenges  is  an  identified 
challenge which remains to be addressed. An increasing number of countries, including many 
in the EU and the US, now arrange their research programmes around the broad construct of 
‘societal  challenges’12  However,  fewer  focus  their  innovation  programmes  in  the  same 
manner.  Finally,  enterprises  increasingly  recognise  collaboration  and  innovation  across 
sectors as the pivotal way to address the grand challenges of the day. As the INSEAD Global 
innovation Index report 2011 stated: "These challenges require new thinking, new technology, 
and  new  ways  of  collaborating  —  an  open  innovation  approach  to  solving  problems  that  is 
based on partnerships among industries, companies, national and regional governments, and 
research organizations and academia."13 

2.5. 

Underlying drivers of the problem 

As regards the global problem definition this impact assessment builds on the priorities set 
in  the  Horizon  2020  with  which  the  EIT  is  aligned.14  Moreover,  some  of  the  problems  are 

11 

12 

13 

14 

http://ec.europa.eu/governance/impact/ia_carried_out/docs/ia_2006/sec_2006_1313_en.pdf 

Pro Inno (2010) Innovation and societal challenges Thematic Report No 1 (2010) Ibid. Cf INnges Thematic Report No 1 (2010) 

Cf 

INSEAD, 

The 

Global 

Innovation 

Index 

2011, 

Accelerating 

Growth 

and 

Development, 

p. 

V, 

http://www.globalinnovationindex.org/gii/GII%20COMPLETE_PRINTWEB.pdf 

The  H2020  IA  lists  "innovation  gap"  as  overriding  problem  and  "Insufficient  contribution  of  research  and  innovation  to  tackling  societal  challenges", 

"Insufficient  technological  leadership  and  innovation  capability  of  firms",  "The  need  to  strengthen  the  science  base"  and  "Insufficient  cross-border 

coordination" as drivers. 

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similar to the ones identified in the first Impact Assessment of the EIT as relevance of those 
issues has not changed.  

Drivers in H2020 impact assessment 

Drivers in EIT impact assessment 

• 

• 

• 

• 

Insufficient  contribution  of  research 
and  innovation  to  tackling  societal 
challenges;  

Insufficient  technological  leadership 
and innovation capability of firms; 

The  need  to  strengthen  the  science 
base; 

• 

• 

• 

Insufficient cross-border coordination; 

• 

record 

Poor 
attracting  and  retaining 
individuals; 

of 

developing, 
talented 

Fragmented innovation system; 

Underutilisation of existing research 
realising 
terms  of 
in 
strengths 
economic or social value; 

levels  of 

Low 
activity 

entrepreneurial 

Box: Complementarity between underlying drivers of Horizon 2020 and EIT SIA 

The 4 underlying drivers which are particularly relevant for the EIT are: 

The talent challenge 

The EU faces interrelated talent attraction, retention and development challenges as well as an 
increasing global competition for talent. In 2008 around 4% of European scientists worked in 
the US15, whilst almost three quarters of European-born 'researchers with a PhD from an US 
University decided to stay, while only three per cent of US born scientists intended to work 
outside their home country.'16 This loss of talent is made even more acute when the calibre of 
worker choosing to leave the EU is made clear - it has been suggested that ‘Europeans living 
in the US are exceptional – they are more educated, earn higher wages, are more likely to be 
employed, and more entrepreneurial than their American or European counterparts. Europe's 
growth  prospects  may  be  dramatically  reduced  by  its  best  and  brightest  living  in  the  US.’17 
Internationally, there is a high level of competition for postgraduate students and researchers 
that EU institutions must navigate. This has emerged as higher education is 'now situated in 
an  open  information  environment  in  which  national  borders  are  routinely  crossed  and 
identities are continually made and self-made '18. Data show high levels of student mobility, 
with a significant dominance of English-speaking destinations for high level students19.  

Fragmented innovation system 

15 

16 

17 

18 

19 

Bosch, X. (2008). Brain drain robbing Europe of its brightest young scientists. Money and independence lure young researchers to the USA, scientists say. The 

Lancet, 361, pp. 2210–11. p2210 

Hartmann,  S.  (2009).  The  Race  for  the  Best:  A  European  Perspective  on  the  Brain  Drain.  In  European  Social  Watch  Report  2009,  Migrants  in  Europe  as 

Development 

Actors 

– 

Between 

Hope 

and 

Vulnerability. 

http://www.cimade.org/uploads/File/solidarites-

internationales/Documents/english%20documents/Book_ESW_2009.pdf#page=22; Dente, K.M. (2007). Scientists on the move. Cell, 129 (1), pp. 15–7.  

Saint-Paul, G. The European brain drain: European workers living in the US. http://www.voxeu.org/index.php?q=node/2739  

Marginson, S. (2006). Dynamics of national and global competition in higher education. Higher Education (2006) 52: 1–39. P1 

CHEPS, INCHER-KASSEL, and ECOTEC,  (2008). The Bologna  Process Independent Assessment – The First  Decade of  Working on the European  Higher 

Education Area, Volume 1 Detailed Assessment Report 

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The  Innovation  Union  highlights  the  need  to  'get  more  value  for  money  and  tackle 
fragmentation.  EU  and  national  research  &  innovation  systems  need  to  be  better  linked  up 
with each other and their performance improved.’20 It is argued that creating better linkages 
between centres will help improve productivity, on the one hand through greater economies of 
scale  that  avoids  duplication,  and  on  the  other  hand  through  a  better  exploitation  of  the 
diversity  of  research  being  undertaken  in  the  EU21.  For  example,  it  has  been  argued  that 
‘industry  has  not  developed  sufficient  absorption  capacity  to  harness  the  potential  of 
university-based research. Consequently, the cross-fertilisation with the business community 
and with wider society remains difficult.’22 Competition and collaboration are indicative of a 
new  globalised  geography  of  innovation.  Whereas  at  one  time  clusters  were  seen  as 
geographically  dependent23,  new  technologies  present  opportunities  for  knowledge  sharing 
and wider collaboration that extends beyond boundaries. The challenge for EU policy makers, 
companies  and  other  stakeholders  is  to  balance  participation  in  global  flows  and  networks 
with an understanding that proximity and location still matter24.  

Underutilised excellence 

There is excellent potential within the European research and innovation structure, provided 
by  a  series  of  centres  of  excellence  that  have  emerged.  Indeed,  in  'practically  all  areas  and 
disciplines,  Europe  has  public  or  private  centres  where  research  and  technological 
development (RTD) is performed at a very high, often world-class level.'25 However, whilst 
these  provide  an  excellent  foundation  that  underpins  the  EU's  research  and  innovation 
activity, there is scope for improvement. A key aspect of this is the need to take advantage of 
network  effects  more  effectively,  for  example,  using  linkages  'as  a  way  of  tapping  into  an 
information  channel  to  obtain  risk-reducing  signals  about  a  venture  opportunity.’26 
Importantly, ‘internal R&D intensity and technological sophistication are positively correlated 
with  both  the  number  and  intensity  of  strategic  alliances’27.  As  a  consequence,  improving 
linkages  and  networks  may  heighten  the  probability  of  high  quality  work  that  ‘cite[s] 
materials more frequently in patents, and cite referenced prior knowledge more quickly’28.  

Low levels of entrepreneurship 

Europe  and  indeed  Japan  trail  the  US  in  enterprise  activity,  and  have  done  for  some  time. 
Europe lacks the generally entrepreneurial culture of the US that sees larger numbers of start 
ups  there,  and  far  greater  figures  for  company  growth  by  market  capitalisation  share29.  One 
underpinning factor is different attitudes to risk, seen as a defining factor of entrepreneurship. 
One  major  study  that  sought  to  understand  entrepreneurship  in  the  US  and  15  EU  Member 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

European Commission, (2010), Innovation Union. P3 

European Commission, (N.D.). Actions for "centres of excellence" with a European dimension. http://ec.europa.eu/research/era/pdf/centres.pdf p1 

European Commission, (2006). Delivering on the Modernisation Agenda for Universities: Education, Research and Innovation. Comm(2006) 2008 Final p5 

Porter, M. E. (1998). Clusters and the New Economics of Competition in Harvard Business Review. Nov-Dec 1998 

Srholec,  M. 

(2007)  A  multilevel  approach 

to  geography  of 

innovation.  TIK  Working  Papers  on 

Innovation  Studies  October  2007. 

http://www.sv.uio.no/tik/InnoWP/0710_MultilevelInnovation_Srholec.pdf 

European Commission, (N.D.). Actions for "centres of excellence" with a European dimension. http://ec.europa.eu/research/era/pdf/centres.pdf p1 

Fiet, J. O. (1996). The information basis of entrepreneurial discovery. Small Business Economics, 8: pp419-430 

Powell,  W.  W.  and  Grodal,  S.  (2004)  Networks  of  innovators  in  Faberberg,  J.  Mowery,  D.  C.  and  Nelson,  R.  R.  eds.  (2004)  The  Oxford  Handbook  of 

Innovation. Oxford: Oxford Uni Press. P59 

Fabrizio,  K.  (2006).  Absorptive  Capacity  and  Innovation:  Evidence  from  Pharmaceutical  and  Biotechnology  Firms.  Goizueta  Department:  Organization  and 

Management. Paper number GBS-OM-2006-002. http://gbspapers.library.emory.edu/archive/00000253/01/GBS-OM-2006-002.pdf  
The Economist, (2009). A special report on entrepreneurs. http://www.economist.com/node/13216037  

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States  found  that  'the  US  population  reveals  a  more  positive  attitude  than  in  the  EU'30.  An 
additional  argument  is  that  in  the  US,  entrepreneurs  are  seen  as  important  growth-oriented 
commodities that should be supported and enabled, whereas in the EU entrepreneurs place too 
much  emphasis  on  returns  and  profits  at  early  stages  reflecting  a  predominantly  finance-
focused venture capital system31. Other barriers include cultural differences and the fact that 
the concept of entrepreneurial thinking is largely confined to business schools and economics 
courses. 32  

2.6. 

Implementation issues 

The  EIT's  independent  evaluation  confirmed  the  EIT  concept  but  referred  to  some  issues 
related to the implementation of the EIT  following  its  launch.  In  assessing  how  far  the  EIT 
achieved  its  overall  objective  of  increasing  the  innovation  capacity  of  Member  States,  the 
evaluation found that the impact of EIT in structuring innovation across Europe is limited due 
to factors such as lack of critical mass, administrative inefficiencies and limited economies of 
scale related to a limited scope of activities. It is important to underline that all of these issues 
are related to the implementation of the EIT. 

The  concept  of  critical  mass  is  important  in  explaining  progress  with  the  EIT.  While  the 
concept of critical mass in the Horizon 2020 impact assessment looks at critical mass from a 
project and a program point of view respectively, this impact assessment approaches critical 
mass from an EIT-institute perspective and a KIC perspective respectively.  

Critical mass  

KIC  perspective:  Critical  mass  is  a  term  used  in  the  EIT  regulation  in  relation  to  the  KIC 
(Art 6) and is closely related to fragmentation of Europe's innovation systems. It refers to the 
number and relevance of excellent partners from education, research and innovation needed in 
a  KIC  to  achieve  a  substantial  economic  and  societal  impact.  The  EIT  evaluation  indicated 
that  the  number  of  KIC  partners  from  excellent  universities,  research  centres  and  global 
players from the private sector, as well as the weight they represent in their respective fields is 
quite  substantial,  showing  that  the  objective  of  achieving  a  critical  mass  has  been  achieved 
within each KIC. Moreover, the balance between the different components of the triangle in 
the partnership is balanced. Collectively, they have the potential to be world-class. 

EIT perspective: Achieving critical mass at the EIT level relates to realising the value of the 
EIT as an institution. With only 3 KICs there are limited opportunities for the KICs to realise 
cross-KIC benefits of related and adjacent innovation opportunities as well as reap economies 
of scale in core functions such as administration and dissemination. It also means that the EIT 
is not of a sufficient scale to truly act as a European institution in its own right. In this respect 
additional KICs are required in order that the EIT can gain the critical mass to be more than 
simply the ‘sum of its parts’. 

30 

31 

32 

Grilo, 

I. 

and  Thurik,  R. 

(2005).  Latent 

and 

actual 

entrepreneurship 

in  Europe 

and 

the  US:  Some 

recent 

developments. 

http://www.indiana.edu/~idsspea/papers/ISSN%2005-6.pdf P13 

The  Telegraph.  (15/2/2011).  What's  wrong  with  European  venture  capital?  http://www.telegraph.co.uk/technology/technology-startup100/8325627/Start-Up-

100-Whats-wrong-with-European-venture-capital.html  

Hege,  U. 

and  Palomino,  F. 

(2008)  Venture  Capital  Performance:  The  Disparity  Between  Europe 

and 

the  United  States. 

https://www.ecb.de/events/pdf/conferences/ecbcfs_cmfi2/Frederic_Palomino_paper.pdf p28 

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Administrative  inefficiency:  The  EIT  evaluation  suggested  that  a  small  number  of  KICs 
means that part of the organisation the EIT is unable to reap economies of scale in terms of its 
administration and monitoring functions. Additional KIC would enable the EIT to operate at a 
more efficient scale. As to the efficiency of the EIT headquarters, this appears to be an issue 
for all small EU agencies, especially in their starting phase. In its annual specific reports for 
2007,  the  Court  of  auditors  reports  an  average  of  30%  of  EU  Agencies'  staff  assigned  to 
administrative tasks, with a proportion exceeding 50% for the smaller ones, suggesting a high 
administrative  burden  that  the  current  regulatory  framework  and  implementing  procedures 
represent  for  small-scale  agencies,  such  as  the  EIT.  Moreover,  the  compliance  burden 
diminishes with agency's age: newer agencies find it more difficult to cope with the financial 
regulations  and  the  implementing  rules.  Thus,  there  seems  to  be  a  learning  curve  for  new 
agencies – and their new administrative staff. Having these considerations in mind, the current 
size and organisation of the EIT's HG function is partly driven by the EU's rules on financial 
procedures.  

Limited  scope  of  activities:  Overall,  the  budget  available  to  the  EIT  has  been  sufficient  to 
finance its early years of operation. It has not been sufficient however, for the EIT to reach a 
critical mass of KICs. Moreover, with only three KICs, the current EIT structure has been a 
valuable  experimental  scale.  KICs.  However, 
resources 
disproportionate  in  the  long  run  in  terms  of  cost/benefit  analysis  as  its  activities  remain 
confined  to  cross-KIC  workshops  and  entrepreneurship  promotion  but  without  reaching  a 
wide range of activities related to dissemination, outreach, internationalisation and learning.  

render  EIT 

this  might 

2.7. 

Baseline 

EIT  activities  are  assumed  to  continue  next  to  other  existing  EU  sources  of  funding  for 
research  and  innovation  such  as  FP7  and  CIP.  The  EIT  continues  to  support  the  KICs, 
promote  entrepreneurship  and  foster  excellence-driven  higher  education.  The  EIT  is  not 
explicitly focused on the resolution of societal challenges. The EIT acts on a standalone basis 
without full synergies and complementarities with other instruments.  

More  specifically,  the  EIT  operates  primarily  through  the  three  Knowledge  and  Innovation 
Communities  in  the  areas  of  climate  change  adaptation  (ClimateKIC)  and  mitigation, 
sustainable  energy  (InnoEnergy)  and  the  future  information  and  communication  society 
(ICTLabs).  The  KIC  include  up  to  195  partners  consisting  of  73  Businesses,  61  Higher 
Education Institutions, 51 Research Institutes, and 10 Public authorities. There are 16 centres 
of co-location and expertise in 12 Member States. Based on the information provided by one 
KIC, taken here as a proxy, its results until 2013 will include around 4000 students, PhD and 
mid-career  professionals  trained  in  the  KIC-own  programmes;  55  new  products  or  services; 
37  patents  registered  (of  which  ten  transferred  to  SMEs),  and  20  spin-offs/  start-ups.  The 
EIT's  and  KICs'  economic  impacts  in  the  baseline  are  presented  in  the  table  below  which 
provides a summary of supply and demand effects of the EIT and KIC activities until 2013. 
The total numbers have been projected on the basis of the existing plans of KICs. Supply and 
demand  side  impacts  of  the  baseline  scenario  are  presented  in  details  in  Annex  on  the 
assessment of EIT options. Table 5.4. presents the budget breakdown for the baseline. 

In the baseline scenario, selected partners from research, business and education have pooled 
resources  into  integrated  partnerships  with  the  aim  at  solving  societal  challenges  via 
innovation. An initial momentum has been achieved through the EIT, spill over effects into 
the  education  sector  are  visible  through  entrepreneurial  education  and  access  to  markets  is 
enhanced  on  the  basis  of  excellence  and  demand.  The  EIT  has  become  a  platform  for  the 

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coordination  of  three  Knowledge  and  Innovation  Communities  and  for  sharing  know-how. 
There is some level of alignment of the European efforts in few selected fields.  

Under the current scenario, the EIT is less likely to evolve into a reference model for the EU 
as a whole. At present, the focus of the EIT has been almost exclusively on the role of KICs, 
with a secondary emphasis on stimulating entrepreneurship. Whilst this approach strengthens 
those parties who are involved within the KICs, the implications of this for areas which may 
not be part of a KIC should not be overlooked. Moreover, an identifiable EIT brand has not 
yet emerged although there is consensus on the values which feature the brand: reputation for 
excellence  and  integration  of  business,  research  and  education.  The  limited  development  of 
the EIT brand and EIT's communication strategy hinders the EIT's ability to achieve its own 
stated objective of providing inspiration and good practice across the EU.  

The  tackling  of  societal  challenges  via  innovation  would  continue  to  be  done  primarily  at 
national level with some coordination and limited pooling of resources on EU level. Member 
States where innovation is part of national strategy are unlikely to regard this development as 
sufficient. Member States which are outside the KIC will see no potential for becoming part 
of these innovation networks. The alignment of the EIT with Horizon 2020 will therefore lead 
to limited synergies in the priority fields which the EIT already addresses with the KICs. 

It is unlikely that many of the current activities of the EIT would continue if the EU support 
was  withdrawn  or  substantially  decreased.  The  KIC  remain  at  a  very  stage  of  development 
and are yet to deliver significant results. They are not yet sufficiently established to continue 
without  external  support.  With  only  3  KICs  there  are  limited  opportunities  for  the  KICs  to 
realise cross-KIC benefits of related and adjacent innovation opportunities. The EIT is not of 
a sufficient scale to truly act as a European institution in its own right.  

3. 

OBJECTIVES 

3.1. 

Review of EIT’s objectives 

The  external  evaluation  of  the  EIT  validated  the  concept  of  the  EIT  and  its  goals  of 
contributing  to  improving  the  innovation  capacity  of  the  EU  by  involving  partner 
organisations  in  integrated  innovation,  research  and  education  activities  at  the  highest 
standards.  EIT's  ambition  of  becoming  a  model  for  the  integrated  European  Innovation 
Research and Education area by generating innovations in areas of key economic or societal 
interest  remains  appropriate.  However,  the  evaluation  pointed  also  to  some  implementation 
challenges associated with the start of a new agency. 

Since  the  introduction  of  the  EIT,  the  importance  of  EU  support  for  tackling  societal 
challenges has increased in significance. The rationale for public intervention is strong given 
the  levels  of  market  failure  present  and  the  missing  incentives  for  firms  to  engage  in 
innovation addressing societal challenges.  

3.2. 

General objectives 

In full alignment with Horizon 2020 and in particular its societal challenges pillar, the EIT is 
well placed to play a key role in the EU level innovation policies. The general objectives of 
the EIT are to:  

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(1) 

Contribute  to  reinforcing  the  innovation  capacity  of  Member  States  and  the  EU  by 
promoting  the  formation  of  integrated  and  co-located  partnerships  which  combine 
innovation, research and education activities and act as globally recognized flagships 
for new models of innovation; 

(2) 

Deliver  actions  which  tackle  key  societal  challenges  through  developing  new 
products, processes and services of the highest international standards. 

3.3. 

Specific objectives 

The following specific objectives support the delivery of the general objectives: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

To integrate the knowledge triangle (of research, innovation and education) to create 
economic  and  social  value  and  to  enhance  the  returns  from  greater  levels  of 
collaboration and co-operation. 

To enhance the attractiveness and commercial relevance of post-graduate education 
opportunities to attract, develop and retain appropriate skills across the EU. 

To exploit the underutilised potential of the EU’s research strengths to deliver greater 
returns in the product and labour markets. 

To develop effective collaborative linkages between centres of excellence to create a 
critical mass for advanced innovation and education. 

To  promote  the  development  of  innovative  products  and  processes  where  market 
failures lead to a sub-optimal provision. 

To strengthen the capacity for entrepreneurship across the EU to create new business 
activity  and  increased  realisation  of  the  potential  value  of  research  and  educational 
outputs. 

To strengthen existing and potential centres of research, innovation and educational 
excellence in the EU to produce globally competitive centres of activity with global 
reputations for excellence. 

To  address  disparities  in  innovation  capacity  across  the  EU  by  developing  and 
sharing the knowledge of the returns to the new models of innovation practices and 
governance. 

3.4. 

Operational objectives 

In support of the objectives above, the operational objectives of the EIT are to: 

(1) 

(2) 

(3) 

Achieve critical mass of KICs through consolidation and expansion; 

Enhance administrative efficiency and capacity through providing support functions 
for the KIC, and simplification measures  

Improve  and  extend  the  EIT  activities  including  dissemination  and  outreach 
activities, including internationalisation, with view of achieving economies of scale. 

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4. 

POLICY OPTIONS 

A  number  of  options  for  the  development  of  the  EIT  were  considered  prior  to  its  launch  in 
2009 and were subject to an impact assessment.33 There has been no significant change in the 
context to warrant the reinstatement of those options which were rejected and so the current 
IA does not consider those rejected options further.34 Instead the Options presented build upon 
the experience gained in the first two years of the EIT’s activities. The Options are guided by 
the objectives.  

The  EIT  evaluation  has  provided  an  important  insight  into  the  EIT-supported  geography  of 
innovation.  According  to  it,  "The  structure  of  the  KICs  reflects  the  traditional  research  and 
innovation  landscape  of  the  EU,  both  in  terms  of  geographical  location  and  the  institutions 
involved. The costs of KIC formation are high… This can act as a barrier to new entrants." 
The studies supporting this impact assessment also identified a clear risk "that EU support for 
KICs will lead to disparities in economic growth". Therefore some mitigations measures are 
required which allow the EIT to address possible risks.  

An Option "Additional KICs" which suggest only the increase of the number of KIC without 
additional  EIT  activities  has  been  discarded  as  it  would  have  increased  the  risk  identified 
above.  Also,  as  the  Option  "Extended  Activities  for  EIT"  which  includes  activities  such  as 
knowledge sharing and dissemination and knowledge sharing cannot be a stand alone option, 
it  has  been  discarded  in  this  analysis.  A  further  Option  combining  the  "Baseline"  with 
"Extended Activities for EIT" has been discarded due to the fact that with the current 3 KIC 
extended activities of EIT such as dissemination, outreach, internationalisation, and cross-KIC 
services support are likely to be costly and ineffective due to suboptimal economies of scale 
and scope to be expected from an EIT with 3 KICs.  

Since the EIT's objective is to tackle societal challenges through innovation, it is important to 
define societal challenges in such a way that complementarities and synergies on the EU level 
are possible from the integration of education, research and enterprise. The EIT must have the 
degree  of  flexibility  that  is  necessary  for  adjustments  and  refinements  as  some  societal 
challenges  may  not,  in  a  couple  of  years,  be  considered  as  the  most  important  ones.  An 
analysis  of  impacts  related  to  the  chosen  priority  fields  should  be  carried  out  prior  to 
establishment of potential future KIC(s). In the identification of the options one should keep 
in mind that the EIT is neither a policy nor a legislative initiative but is, rather, an institute 
independent from the EC. For this reason the EIT will only be able to reinforce the innovation 
capacity of Member States and the EU in so far as its activities directly support such actions. 
Similarly, it can only tackle those societal challenges which its actions are targeted towards.  

33 
34 

http://eit.europa.eu/fileadmin/Content/Downloads/PDF/Official_documents/impact_en.pdf 
Five  options  were  debated:  1)  the  Centralized  EIT  being  a  centrally  governed  institution  performing 
directly research, education and innovation activities and directly responsible for the KIC management ; 
2) the Distributed EIT where the EIT is a funding body but KIC are autonomous and perform directly 
education, research and innovation activities; 3) the Integrated EIT which is a combination of Options 
1) and 2) and where the EIT Governing Board sets the overall strategy, selects, evaluates and monitors 
the KIC but KIC are autonomous to organise their activities; 4) the Funding-Labelling EIT where the 
EIT acts as a funding body and awards the EIT label based on excellence; 5) the Status-quo (a ‘no EIT’ 
option).  Two  options  were  also  excluded  during  this  first  assessment  process,  namely;  a)  The  single 
green  field  institution  and b)  The network of organizations. Policy  option 3  emerged as  the  preferred 
option.  The  Impact  Assessment  exercise  states  that  “This  option  aims  at  finding  a  balance  between 
option 1 and 2 keeping the benefits of both while avoiding their drawbacks” (p.32). 

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Three Options are analysed: 

• 

• 

• 

Option 1: Closure: The winding up of the EIT 

Option 2: Status Quo: To continue with the existing 3 KICs 

Option 3: Progressive growth: To launch a number of new KICs and extend the 
role of the EIT 

Option 1. Closure 

One Option for the EIT would be to wind up its activities. This forms the ‘stop option’ and all 
activities  of  the  EIT  are  assumed  to  cease.  Any  prolongation  of  the  activities  of  the  KICs 
would be dependent upon their ability to secure funds to replace those lost from the winding-
up of the EIT. It is considered unlikely that the three KICs would be able to continue activities 
as  the  evaluation  of  the  EIT  found  that  they  were  not  yet  financially  self-sufficient.  Some 
residual  activity  might  be  maintained  and  assumptions  to  this  effect  are  built  into  the 
assessment  exercise.  No  other  existing  initiative  at  EU  level  can  support  the  long-term 
integration  of  excellent  research,  education  and  innovation  to  address  specific  societal 
challenges. Moreover, the role to be played by the EIT in dissemination of good practices of 
innovation would remain unfulfilled. 

Option 2. Baseline 

Continuing  with  the  existing  3  KICs  would  enable  the  EIT  to  consolidate  its  activities  and 
focus  upon  a  limited  number  of  priority  fields.  Under  this  baseline  scenario,  the  existing 
pattern of activity of EIT and the KICs is assumed to continue on a similar pattern and scale. 
The  Option  would  not  involve  any  expansion  of  funds  to  the  EIT  but  would  continue  its 
existing budget. Any expansion of activity by the KICs would be as a result of their ability to 
secure additional funding.  

Activities  of  the  EIT  would  continue  at  the  present  (planned)  level.  This  includes  activities 
related  to  entrepreneurship  and  workshops  bringing  together  KIC  participants.  Under  this 
Option  new  KICs  could  only  be  established  once  an  existing  KIC  had  ceased  to  receive 
funding from the EIT. This would maintain a constant budget and retain the operation of three 
EU-supported  KICs.  The  EIT's  and  KICs  blueprint  on  European  innovation  will  be  limited 
due to lack of critical mass to make a noticeable impact (cf. although there is no consensus as 
to what constitutes critical mass, most respondents believed that somewhere between 6 and 10 
KICs  would  be  an  appropriate  scale  for  the  future)35.  Table  5.4.  provides  the  budgetary 
projection of the EIT for 2014-2020. 

Option 3. Progressive Growth and extended activities 

Under this Option a number of new KICs would be launched by the EIT, and thus a greater 
number of priority fields would be covered. The budget for each newly-launched KIC would 
be the approximately same as that currently applied to existing KICs. Based upon the analysis 
of the supporting study to this impact assessment regarding economies of scale and the EIT 
proposals for the future it is considered that the total number of KICs could eventually rise up 
to 9 by 2020 with 3 KICs to be launched in 2015 and 3 more KICs to be launched in 2018 

35 

EIT External expert evaluation of the EIT, May 2011 

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(allowing for a consolidation phase after each launch as after the launch of KIC in 2010 and 
also  for  a  second  independent  evaluation  due  in  2016).  This  estimation  is  based  on  the 
judgement of the management and absorption capacity of the EIT as evaluated by the external 
evaluation  of  the  EIT  and  is  reflected  in  the  results  of  the  studies  supporting  this  impact 
assessment  and  also  reflect  the  societal  challenges  identified  in  Horizon  2020.  The  budget 
breakdown projection for this option 2014-2020 is presented in Table 5.4. 

Although there is no consensus on what constitutes a critical mass of KICs, the Commission 
has considered that 9 KICs will enable the EIT to achieve its expected impact on innovation, 
research and education. This is based on the assumption that each KIC is composed between 5 
to 6 centres of excellence (co-location centres), and that the very same centres may participate 
in  more  than  one  KIC,  hence  leading  up  to  approximately  a  critical  mass  of  50  centres  of 
excellence  across  the  EU.  A  further  expansion  beyond  the  9  KICs  may  compromise  the 
principle of world-class excellence, which is a cornerstone of the EIT model.  

Current and planned activities of the EIT would continue and expand in order to consolidate 
the  EIT  as  a  learning  organisation  in  its  own  right.  This  would  include  developing 
dissemination and outreach strategies as well as the ‘internationalisation’ agenda of the EIT 
regarding  its  relationships  with  3rd  countries.  Furthermore,  this  option  implies  that  the  EIT 
starts additional activities in order to extend the benefits gained through the KICs to audiences 
beyond  those  directly  involved  in  the  KICs.  The  EIT  would  operate  additional  activities 
which would serve to link firms, research institutes, Higher Education Institutions and public 
authorities  located  in  areas  where  innovation  capacity  is  weaker.  The  EIT  would  seek  to 
promote  the  development  of  innovation  capacity  in  these  areas.  This  would  not  involve  a 
dilution  of  the  ‘excellence’  criteria  applied  to  the  selection  of  KICs  but  would  constitute  a 
deepening of the role of the EIT. Some of the measures will also serve to mitigate the risks 
identified for the case of a simple increase of the number of supported KICs while the aim in 
all activities would be to boost the outreach and profile of the EIT in terms of furthering the 
integration of the knowledge triangle. 

• 

• 

• 

• 

• 

• 

• 

• 

Cross-KIC collaboration  

Structured co-operation with actors from outside of the EIT;  

Activities  promoting  new  models  of  innovation  to  a  wider  EU  innovation 
community;  

Fellowships for talented people from across the EU and beyond;  

Competitions, fairs and events in the field of entrepreneurship; 

Creation of an EIT Alumni Network;  

Web based tools for knowledge sharing and networking around the EIT; 

Developing an international communication and engagement strategy. 

Box: Examples for extended KIC activities  

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5. 

ANALYSIS OF IMPACTS 

The  analysis  of  the  impacts  of  the  various  options  identified  contains  six  sections.  Firstly, 
some basic constraints of the assessment are identified upfront. Second, general assumptions 
for the analysis and the investment principles of the EIT are outlined. This is followed by the 
preliminary  priority  fields  of  future  KIC  and  their  likely  effect.  Fourthly,  the  budgetary 
assumptions  of  options  are  presented.  Fifthly,  the  most  relevant  economic,  social  and 
environmental impacts are briefly outlined and a particular emphasis is put on the economic 
impacts which are identified as being strongest. Finally, the analysis contains a section with a 
qualitative  assessment  of  the  more  significant  impacts  identified  in  the  areas  in  which  the 
proposed actions are likely to have effects.  

5.1. 

Assessment challenges 

There are certain challenges to the assessment and they relate primarily to the evidential base 
of the priority fields. These are listed below in table 5.1 which outlines a range of challenges 
to  the  impact  assessment  arising  from  a  potential  lack  of  evidence  to  support  the  analysis, 
together with an assessment of the risk of occurrence and potential mitigation measures.  

Challenge 

Risk 

Mitigation measure 

Difficulties  in  defining  the 
specificities  of  potential 
future priority fields 

High:  Supporting  activities 
fields  which  are  not 
in 
sufficiently  assessed  upfront 
and  can  lead  to  deadweight 
effects 
suboptimal 
or 
investment decisions.  

of 

for  new  KICs. 

assessment 
social 

the 
Targeted 
and 
economic, 
environmental  impact  per  priority 
field  before  launching  any  new 
call 
Involve 
relevant  policies  systematically  in 
the  KICs 
foster 
in  order 
necessary  changes  related  to  KIC-
framework 
specific 
conditions 
legislation, 
in 
(changes  needed 
need 
public-private 
partnerships, etc.). 

for 

to 

evidence 
impacts 

Limited 
differential 
innovation 
throughout the EU 

on 
of 
activity 

of 

evidence 

to 
Lack 
support 
assumptions 
around  the  scale  of  future 
KICs 

High:  The 
different  areas 
from 
innovation 
KICs 
through 
substantially 
influence 
overall impacts of EIT.  

ability 
of 
to  benefit 
technological 
developed 
may 
the 

Differential impacts across the EU 
will  be  explored  on  a  qualitative 
basis,  considering  Member  States' 
from 
to 
ability 
technological 
innovations 
developed through EIT. 

benefit 

levels  of 

Medium:  The 
impact  of 
KICs  will  largely  be  driven 
innovation 
by 
activity  support,  which  will 
largely  be  driven  by  levels 
of associated expenditure. 

in 

An  assumption  will  be  made  that 
future  KICs  will  mirror  current 
terms  of  scale,  with 
KICs 
scenarios developed to explore the 
implications of KICs or larger and 
smaller scales.  

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of  EU 

specific 
Lack 
evidence  on  the  rate  of 
return to innovation 

factors 

Medium: There may be EU 
specific 
that 
influence  the  rates  of  return 
to innovation activity, which 
will  influence  the  potential 
productivity effects.  

US  based  results  will  be  retained, 
and  additional  qualitative  analysis 
will  be  provided  on  transferability 
of  US  based  results  in  an  EU 
context. 

of 

evidence 

to 
Lack 
support analysis around the 
impacts of KICs on student 
retention 

impacts 
The 
Low: 
associated  with  retention  of 
skills in the EU are likely to 
in  magnitude 
be 
impacts 
relative 
associated with KICs.  

to  other 

small 

A  qualitative  assessment  of  the 
potential  for  KICs  to  help  retain 
skills acquired in the EU  

Difficulties  in  establishing 
the 
likely  economies  of 
scale  associated  with  EIT 
infrastructure 
an 
increase  in  the  number  of 
KICs 

and 

Low:  The  direct  impacts  of 
EIT  are  likely  to  be  subject 
to  substantial  crowding  out 
effects and are unlikely to be 
a  significant  factor  in  the 
assessment.  

Alternative  staffing  scenarios  will 
be  provided  to  explore  possible 
economies of scale, supported by a 
qualitative  assessment  of 
the 
uncertainties involved. 

Table 5.1 Assessment challenges 

5.2. 

Selection of future priority fields 

The effects from interventions in potential priority fields for new KICs cannot be assessed a 
priori  as  they  do  not  correspond  to  a  well-defined  industrial  or  technological  sector  but 
combine  a  wide  variety  of  economic  activities  and  technological  capabilities  including 
converging technologies. However, their impacts and economic effects are likely to be similar 
to the ones analysed in this impact assessment based on the example of the first three KICs. 
This means that on an aggregated level the effects and impacts of the future KICs are likely to 
closely resemble those from the three which started activities in 2010. A further analysis of 
the impacts of potential priority fields for future KICs is not possible for this impact analysis 
since these themes have not yet been decided.  

Initial input on potential themes has been received from the EIT Governing Board and from 
the Open Public Consultation. On this basis, and taking also into account current discussion 
on Horizon 2020, Commission services are currently identifying a limited number of themes 
for  future  KICs,  on  the  basis  of  their  expected  economic  and  societal  impact,  education 
potential  and  innovation  added-value.  More  specifically,  the  priority  fields  for  future  KICs 
which will have to meet the following criteria: 

• 

• 

• 

Address major economic and societal challenges Europe faces, and contribute to the 
delivery of the EU 2020 Agenda; 

Align and co-ordinate with priorities defined in Horizon 2020 and other EU policies, 
in particular of education; 

Be able to mobilise investment and long-term commitment from the business sector; 
have an existing market for its products or be able to create new ones; 

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• 

• 

• 

• 

Create  sustainable  and  systemic  impact,  measured  in  terms  of  new  educated 
entrepreneurial people, new technologies and new business ; 

Blend  a  critical  mass  of  excellent  research,  education  and  innovation  stakeholders, 
which would otherwise not unite; 

Require  trans-disciplinary  approaches  and  the  development  of  new  types  of 
education across the boundaries of disciplines; 

Address  major  innovation  gaps  such  as  the  European  paradox,  i.e.  themes  where 
Europe has a strong research base but a weak innovation performance. 

5.3. 

Budgetary and funding assumptions 

The  EIT  funds  on  average  up  to  25%  of  the  global  KIC  budget.  The  Annex  "KIC  budget 
2011"  provides  an  illustration.  The  EIT  funding  is  foreseen  only  for  "KIC  added  value 
activities", namely those activities that allow the integration of knowledge triangle (education, 
research and innovation) policies and partners within and across the KIC, in accordance with 
the  KIC  objectives  and  priorities  laid  down  in  the  business  plans.  It  includes  in  particular 
education,  entrepreneurship  and  business  creation  projects  of  the  KICs,  which  top  up 
investment  in  other  well-established  activities  (eg.  existing  research  projects).  The 
administration, management and coordination activities of the KIC should also be covered by 
the  EIT  contribution.  Due  flexibility  should  be  granted  to  the  management  of  this 
contribution. The remaining 75% of the KIC budget is a pre-requisite, showing the financial 
commitment of KIC partners and its leverage effect (cf. not to be confused with co-financing 
at grant action level). This includes KIC partners own revenues and resources, but also public 
funding,  including  from  EU  initiatives,  in  particular  Framework  Programme  and  Structural 
Funds. In such case, the KIC (or part of their Partners) apply for funding in accordance with 
the  respective  rules  of  the  programmes  and  on  an  equal  footing  with  other  applications,  be 
bound by H2020 Rules for Participation.  

In order to assess the impacts of the various options assumptions are made as to the possible 
income  and  expenditure  of  the  EIT  and  the  KICs.  Overall  levels  of  impacts  will  vary 
depending upon the budgets available and the type of expenditure. The budget estimates are 
based on the KIC lifecycle36 and on the principle that a KIC will be financed on average for 
up  to  25%  of  its  global  expenditure  for  the  whole  life-cycle  (15  years).  The  EIT  funding 
model builds on following aspects: 

Option 1 

36 

The KIC life cycle phases cover the following phases: a) a "setting-up" phase of 2 years: it is a time for 
a KIC to get organised, set up necessary financial and legal structures as well as recruit crucial staff. 
The implementation of the real KIC activities will start notably on the second year of implementation. 
b) "development" phase of 3 years: it is assumed that the KIC has been already established and begun 
implementing its core activities, however still dynamically expanding in terms of the scope of activities 
and the number of partners. This would lead to a substantial increase of the KIC budgets. c) "achieving 
sustainability"  phase  of  6  years:  the  KIC  becomes  a  still  growing  but  stable  structure  with  clearly 
defined  scope  of  activities.  It  becomes  self  sustainable  in  terms  of  budget  value  but  changes  are  not 
radical and easily foreseeable. d) "sustainable" phase of 4 years: the KIC has already a stable structure 
with clearly defined scope of activities. 

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No  EU  expenditure  on  EIT  HQ  or  KICs.  The  own  income  and  expenditure  of  KICs  from 
2014-2020  is  assumed  to  be  around  one  third  of  total  KIC  activity  in  2013.  Expenditure  is 
thus strongest in early years and trending to zero by 2020. No income or expenditure by EIT 
HQ. 

Option 2 

EU income and expenditure by 3 KICs 2014-2020 to total €1,800m. This figure is based on 
assumptions of the budget required to consolidate existing KICs and a budget for the EIT for 
outreach  and  dissemination,  cross-cutting  support  to  the  KICs  and  EIT  administrative 
expenditures. During the 2014-2020 period, the EIT contribution to the three KICs will cover 
the last years of their "development phase", and "achieving sustainability phase". KICs own 
resource expenditure to total some €4,000m. EIT  HQ to have income and expenditure in same 
period of some €55m.  

Option 3 

EU income and expenditure by 9 KICs 2014-2020 to total €2,800m. This figure is based on 
assumptions  of  the  budget  required  to  consolidate  existing  KICs,  a  gradual  development 
towards  new  KICs  (three  new  KICs  by  2015  and  2018  each)  and  a  budget  for  the  EIT  for 
outreach  and  dissemination,  cross-cutting  support  to  the  KICs  and  EIT  administrative 
expenditures.  The  budget  reflects  the  different  stages  of  development  of  the  9  KICs. 
Expenditure will be strongest in later years as KICs profiled to come on stream in a staggered 
manner. KICs own resource expenditure to total some €6,100m. EIT HQ to have income and 
expenditure in same period of some €100m. 

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For the actual 3 KICs ONLY (=Option 2) - EIT financial contribution needed for MFF 2014/2020 (million 
€)  
Year 
Year of KIC 
Life 

TOTAL 

2019 

2016 

2017 

2018 

2014 

2015 

2020 

11 

10 

7 

8 

9 

5 

6 

99 

58,9 

72,6 

82,5 

EIT Fund 
needed by 
KIC 
EIT Fund 
needed for 3 
KICs 
KIC stake 
For 3 new KICs starting in 2015 - EIT financial contribution needed for MFF 2014/2020 (million €) 
Year 
Year of KIC 
Life 

311,85 
633,15 

217,8 
442,2 

211,2 
748,8 

176,7 
393,3 

336,6 
683,4 

247,5 
502,5 

297 
603 

103,95 

112,2 

2019 

2016 

2017 

2018 

2014 

2015 

2020 

70,4 

2 

1 

3 

4 

5 

6 

8,00 

34,50 

20,00 

EIT Fund 
needed by 
KIC 
EIT Fund 
needed for 3 
KICs 
KIC stake 
For 3 new KICs starting in 2018 - EIT financial contribution needed for MFF 2014/2020 (million €) 
Year 
Year of KIC 
Life 

217,8 
442,2 

176,7 
393,3 

103,5 
346,5 

137,7 
372,3 

60 
240 

24 
24 

72,60 

45,90 

58,90 

2019 

2016 

2017 

2018 

2014 

2015 

2020 

1 

2 

3 

599,55 €

1.798,65 €
4.006,35 € 

TOTAL

239,90

719,70
1.818,30 € 

TOTAL

8 

20 

2014 

60 
24 

24 
0 

EIT Fund 
needed by 
KIC 
EIT Fund 
needed for 3 
KICs 
KIC stake 
EIT financial contribution needed for the MFF 2014/2020 (million €) (=Option 3)  
Year 
2019 
Actual KICs 
3 new KICs 
on 2015 
3 new KICs 
on 2018 
EIT other 
than KICs 
EIT Adm. 
Budget 
TOTAL 
EIT 
BUDGET  

2016 
247,50 € 

489,05 € 

311,85 € 

137,70 € 

588,80 € 

336,60 € 

176,70 € 

176,70 € 

187,70 € 

321,50 € 

254,30 € 

217,80 € 

414,50 € 

297,00 € 

103,50 € 

60,00 € 

24,00 € 

24,00 € 

60,00 € 

2017 

2018 

0,00 € 

0,00 € 

2015 

6,00 € 

4,00 € 

7,00 € 

9,50 € 

5,00 € 

9,00 € 

0,00 € 

5,00 € 

7,50 € 

0,00 € 

6,00 € 

9,50 € 

5,00 € 

9,00 € 

0,00 € 

34,5 

62,50

103,5 
246 

187,50
270,00 € 

2020 

211,20 € 

TOTAL 
1.798,65 €

217,80 € 

719,70 €

103,50 € 

187,50 €

6,00 € 

9,50 € 

37,00 €

61,00 €

548,00 € 

2.803,85 €

Table 5.4: Budget breakdown projection for the KICs 

5.4.  Most relevant economic, social and environmental impacts  

• 

Economic  effects:  the  strongest  effects  are  found  around  research  and  innovation 
activity and the influence on investment flows. The long run effects on GVA occur 
through  a  combination  of:  (a)  an  enhanced  productivity  effect  and  (b)  a  terms  of 

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• 

• 

trade effect – via the impact on competitiveness. The distributed model adopted for 
the EIT encourages cross-border flows and contributes to the development of a single 
European  area  for  education,  research  and  innovation.  The  benefits  of  this  may  be 
territorially imbalanced.  

Social  effects:  welfare  benefits  accrue  owing  to  the  development  of  innovations 
addressing societal challenges. Labour market effects will depend upon the nature of 
the labour market in which they accrue, but are generally positive. The Options may 
also  support  the  modernisation  of  Higher  Education  stimulating  additional  social 
benefits. 

Environmental  effects:  they  are  -  at  worst  -  neutral,  at  best,  particular  fields  of 
activity  may  promote  the  development  of  innovations  which  provide  positive 
environmental benefits. All of the three existing KICs will provide results which can 
be turned into innovation for environmental improvements. While this is obvious for 
Climate KIC and InnoEnergy, it is also true for EIT ICTLabs which addresses, inter 
alia, the subject of smart environmentally friendly cities. 

Quantifying the economic impacts 

The  likely  economic  impacts  of  the  EIT  and  the  associated  KICs  will  be  influenced  by  the 
following factors:  

• 

• 

• 

Short term 'demand side' effects associated with the activities being undertaken and 
the  expenditure  of  additional  students.  They  will  clearly  represent  real  potential 
effects on the economies of the knowledge centres involved. How far they represent 
additional  impacts  at  EU  level  is  more  problematic  once  account  is  taken  of  the 
likely 'crowding out' of other economic activity as a result of the additional taxation 
or reduced spend in other areas required to finance the initiatives. 

Much  more  significant  in  the  longer  term  will  be  'supply  side'  effects  from  the 
enhancements  to  the  EU's  skill  and  knowledge  base  and  its  stocks  of  innovation-
driven businesses – and the results of this in terms of improved competitiveness and 
impacts  on  productivity,  international  trade  performance,  GVA  and  employment. 
Developing  realistic  quantitative  estimates  of  these  impacts  represents  a  major 
challenge  given  the  weaknesses  and  in  the  evidence  identified  in  the  external 
evaluation. 

The  'priority  fields'  addressed  by  the  EIT  through  the  KICs  are  likely  to  have  an 
effect  on  the  magnitude  of  the  impacts.  However,  the  priority  fields  have  not  yet 
been decided and have therefore not been subject to a detailed quantitative economic 
analysis within this impact assessment.  

5.5. 

Analysis of the more significant impacts by option 

The  following  section  contains  a  qualitative  assessment  of  the  more  significant  impacts 
identified in the areas where proposed options are likely to have effects.  

Innovation and research 

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The proposals are conducive to increasing levels of research and innovation across all three 
Options. Each Option will promote stronger levels of research and innovation, and improve 
the  efficiency  of  the  innovation  effort.  All  options  will  do  so  directly  through  providing 
investment  in  innovation  activity  to  generate  value  from  associated  research  and  providing 
supply-side improvements to the innovation process. Option 3 will provide positive benefits 
also  indirectly  through  supporting  the  generation  and  dissemination  of  better  practices  in 
innovation promotion and innovation governance. 

Education systems 

A  strong  element  of  the  activity  of  the  EIT  is  to  encourage  changes  to  Higher  Education 
provision in the EU, in particular through an ‘EIT quality label’ for post-graduate courses. In 
the  absence  of  the  EIT  this  quality  label  would  not  be  available  and  so  there  will  be  no 
benefits under Option 1. Options 2 and 3 will both improve the quality of education provision, 
particularly  with  regards  to  business  involvement,  and  the  provision  of  entrepreneurial 
education. This will serve to positively affect cross-border educational provision and improve 
access to relevant courses. Option 3 will also provide some positive impacts through raising 
awareness of good practice in those parts of the EU which are not directly participating in the 
EIT and so encouraging the modernisation of higher education provision more widely. 

Internal market and competition 

There  is  a  potential  positive  impact  for  the  EIT,  through  the  KICs,  on  the  movement  of 
workers, the flow of capital and on better consumer choice through the introduction of new 
and  improved  goods  and  services.  The  impacts  will  be  stronger  under  Option  3  than  under 
Option 2 owing to the greater scale of activity under this Option and Option 1 will have some 
positive residual impact but this is unlikely to significantly affect market conditions. 

Competitiveness, trade and investment 

The  effect  of  the  EIT,  through  the  KICs,  on  productivity  is  likely  to  be  positive  under  all 
Options. The scale of the impact will be greatest under Option 3 and least significant under 
Option  1  where  it  is  considered  that  the  positive  effects  will  have  no  significance  at  the 
European scale. Options 2 and 3 are also likely to deliver gains in the global competitiveness 
of  those  firms  and  institutions  involved,  providing  positive  spill  overs  throughout  the 
economy. The activity of the EIT will also provoke cross-border investment flows through the 
relocation  of  economic  activity.  It  is  considered  that  this  will  have  a  positive  impact  on 
overall levels of competitiveness which will be greater under Option 3 than under Option 2 
due to the scale of the former.  

Consumers and households  

Options  2  and  3  are  likely  to  have  positive,  albeit  modest,  impact  on  consumers  and 
households  through  improving  the  availability  of  goods  and  services,  and  so  improving 
consumer choices in areas of societal challenges. It is considered unlikely that Option 1 will 
generate sufficient innovations to have a noticeable effect in this area. Furthermore, options 2 
and 3 can foster behavioural changes in society. One can distinguish between non-KIC related 
behavioural  changes  (such  as  changes  in  attitudes  towards  entrepreneurship,  risk-taking 

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attitudes and improved systemic thinking) and KIC-specific behavioural changes (eg. attitudes 
towards climate change, energy consumption)37.  

Specific sectors and regions 

Owing  to  the  multi-  and  cross-disciplinary  approach  adopted  in  the  KICs  many  sectors  will 
potentially  engage  with  the  EIT.  Some  sectors  may  gain  more  positive  benefits  than  others, 
such as the ICT and energy sectors in the current structure The territorial impacts of the EIT 
will be are likely to be more significant. Regions and Member States which are the site for co-
location  centres  will  have  opportunities  to  gain  positive  benefits  through  economies  of 
agglomeration and the reaping of positive externalities. These opportunities will be fostered if 
a close cooperation is established between the KIC partners in the regions and the authorities 
and  organisations  involved  in  designing  and  delivering  the  Regional  Innovation  Strategies. 
Such  cooperation  can  be  facilitated  by  the  setting-up  of  Regional  Innovation  and 
Implementation  Communities  (RICs),  as  it  is  the  case  for  the  Climate  KIC.  In  contrast, 
regions which are excluded from these activities may experience risks of cumulative negative 
effects. This could reinforce existing inequalities in the cases of Options 2 and 3 – bringing 
positive  benefits  to  regions  which  exhibit  existing  strengths  in  innovation  capacity  but 
adversely  affecting  those  with  existing  weaknesses.  These  risks  could  be  avoided  if  the 
regions which are not site for co-location centres adopt Smart Specialisation (RIS3) including 
partnership with regions hosting co-location centres. Moreover, Option 3, in seeking to extend 
the coverage of the EIT to generate new models of innovation governance across the EU has 
the potential to generate positive benefits in all EU regions and to work to mitigate existing 
and potential inequalities in innovation performance.  

Third countries/international relations 

Options 2 and 3 are considered to have the potential to affect investment flows between the 
EU and third countries through creating a more conducive  environment for that investment. 
Both Options may also act to attract flows of students and researchers from 3rd countries. It is 
not considered that this will negatively impact on the development of developing countries. It 
is considered that Option 3 offers the potential to generate positive impacts in this area. This 
will be particularly so if the EIT develops a positive strategy for internationalisation. 

Macro-economic environment 

All options demonstrate that they will have a positive impact on economic growth. This will 
occur  both  through  demand-side  effects  and  positive  improvements  to  the  supply-side.  The 
scale  of  the  impact  will  be  greatest  under  Option  3  and  least  significant  under  Option  1. 
Option 3 has some potential for positive effects to occur should new more efficient models of 
innovation governance and knowledge triangle integration be disseminated and then adopted 
by actors elsewhere in the EU. 

Employment and labour markets 

All options facilitate new job creation and support entrepreneurship. There will be particular 
benefits  to  new  entrants  to  the  labour  force  through  improvements  made  in  educational 
provision  at  a  post-graduate  level,  leading  to  a  more  skilled  workforce.  There  will  be  no 

37 

Haegeman K. and Cagnin C., Priority areas for the next waves of knowledge and innovation communities, JRC Technical Note (JRC65426), 2011, p.4 and pp. 
12-19. Weblink: http://ipts.jrc.ec.europa.eu/publications/pub.cfm?id=4479). 

EN 

26 

   EN 

 
                                                 
significant  net  job  losses  as  a  consequence  of  these  Options  and  none  will  have  significant 
negative  consequences  for  particular  professions  or  groups  of  workers.  The  labour  force 
groups  most  likely  to  benefit  are  those  engaged  in  research-related  occupations  and  those 
engaged in managerial and skilled occupations. The scale of the impact will be greatest under 
Option 3 and least significant under Option 1. 

Options  2  and  3  will  also  support  the  functioning  of  labour  markets  in  the  EU  through 
encouraging  the  temporary  mobility  of  labour  to  engage  in  knowledge  exchange  activities. 
This  will  serve  to  overcome  some  of  the  identified  labour  market  barriers  to  knowledge 
exchange.  

Environmental impacts 

It is judged that Options 2 and 3 will have positive impacts on climate; transport and energy 
use; air quality; renewable and non-renewable resources, and environmental consequences of 
firms and consumers. This will be achieved through innovations developed and produced by 
the KICs operating in fields which are related to these topics. Option 3 could also stimulate 
additional benefits in this area  through cross-KIC and extra-KIC activities,  but the potential 
scale of these is difficult to assess and so no significant impact is accorded to this. Although 
Options 2 and 3 will involve mobility of personnel, which will have negative environmental 
effects,  these  journeys  are  considered  to  be  offset  by  journeys  which  would  have  been 
undertaken anyway resulting in no net negative impact. In this regard KIC activity involves a 
refocusing of activities rather than new activities per se.  

6. 

COMPARING THE OPTIONS 

Based on the impacts analysed above, interim conclusions can be drawn on the strengths and 
weaknesses of the individual options and their ability to achieve the objectives properly. This 
forms up the first step of the comparison of options. In a next analytical step, the options are 
compared on the basis of their effectiveness, efficiency and coherence. Finally, some possible 
risks associated with the options are highlighted.  

6.1. 

Effectiveness of options - Strengths and weaknesses by Option 

Table 6.1 considers the relative strengths and weaknesses of the three options against each of 
the objectives established for the EIT. In a separate Annex there is a assessment of the likely 
economic impacts of the different Options. 

Objectives 

Option 1 

Option 2 

Option 3 

promote 

the 
To 
of 
development 
innovative products and 
processes  where  market 
failures  lead  to  a  sub-
optimal provision 

Strength: Does not 
of 
risk 
run 
government 
failure  

Weakness:  Does 
overturn 
not 
existing  market 
failures 

Supports 

the 
Strength: 
innovative 
development  of 
products 
processes, 
and 
particularly  related  to  societal 
challenges 

Weakness: 
Limits 
benefits  to  priority  fields 
already  active.  Runs  risk 
of government failure 

Supports 

the 
Strength: 
innovative 
of 
development 
products and processes - across 
a  variety  of  fields  providing 
critical  mass  and  opportunities 
- 
for 
to 
particularly 
societal 
challenges. 
Opportunity  to  promote  cross-
KIC and extra-KIC engagement 

innovation 
those  related 

adjacent 

EN 

27 

   EN 

Weakness:  Runs  risk  of 

 
the 

To 
exploit 
underutilised 
the 
of 
potential 
EU’s 
research 
strengths  to  deliver 
in 
greater 
and 
the  product 
labour markets 

returns 

Strength:  No 
risk  of 
rent 
seeking 
behaviour 

Weakness: 
Fails to address 
existing 
underutilised 
potential 

Strength:  Promotes  the 
more effective utilisation 
of research undertaken in 
particularly 
the  EU, 
through 
cross-border 
activities 

Weakness:  Risk  of  rent 
seeking behaviour and of 
deadweight 
and 
displacement/substitution 
of 
sector 
investment 

private 

government failure 

EU, 

Strength:  Promotes 
the 
more  effective  utilisation 
of  research  undertaken  in 
particularly 
the 
through 
cross-border 
activities.  Opportunity  to 
promote  cross-KIC  and 
extra-KIC engagement 

Weakness:  Risk  of  rent 
seeking  behaviour  and  of 
deadweight 
and 
displacement/substitution 
of 
investment 

private 

sector 

and 

strengthen 
To 
and 
existing 
potential  centres  of 
research, 
innovation 
educational 
excellence 
EU 
to 
globally 
competitive  centres 
activity  with 
of 
global 
reputations 
for excellence 

in 
the 
produce 

develop 

To 
effective 
collaborative 
between 
linkages 
of 
centres 
excellence to create 
a  critical  mass  for 
advanced 
innovation 
education 

and 

Strength:  Does 
not  strengthen 
some  centres  at 
expense 
of 
others  

Weakness: 
Current 
structures 
continue 
underperform 
at a global scale

to 

Strength:  Does 
privilege 
not 
some 
collaborative 
linkages 
others 

over 

Weakness: Fails 
provide 
to 
incentives 
to 
develop 
collaborative 
linkages 

centres 

Strength: 
Strengthens 
existing 
of 
excellence 
through 
promoting 
investment 
and  network 
linkages. 
investments 
Targeted 
enable  the  emergence  of 
globally 
competitive 
centres 

centres 

Weakness:  May  privilege 
existing 
of 
expertise  with  resources 
and 
to 
capacity 
successfully bid for funds 
over  those  with  potential 
but  lacking  resources  or 
reputation 

Strength: 
collaborative 
border linkages 

Promotes 
cross-

Weakness:  May  privilege 
existing  networks  and 
serve 
to  exclude  new 
participants 

centres 

Strength: 
Strengthens 
existing 
of 
excellence 
through 
promoting 
investment 
and  network 
linkages. 
investments 
Targeted 
enable  the  emergence  of 
globally 
competitive 
centres.  Knowledge  and 
know-how  from  existing 
centres of excellence will 
be  valorised  across  the 
EU 

Weakness: 
May 
strengthen  some  existing 
centres of expertise.  

Strength: 
Promotes 
cross-
collaborative 
border  linkages.  Able  to 
engage  with  actors  both 
within  and  outside  of  the 
KIC networks. 

Weakness:  May  privilege 
existing  networks  and 
serve 
to  exclude  new 
participants 

EN 

28 

   EN 

 
the 
and 

enhance 
To 
attractiveness 
commercial 
relevance  of  post-
graduate  education 
opportunities 
to 
attract,  develop  and 
appropriate 
retain 
the 
skills  across 
EU. 

To  strengthen  the 
capacity 
for 
entrepreneurship 
across  the  EU  to 
create new business 
and 
activity 
increased 
realisation  of 
the 
potential  value  of 
and 
research 
educational outputs 

Strength:  No 
risk 
of 
distorting 
market 
provision 
through 
introduction  of 
EIT 
quality 
label 

Weakness:  EU 
education 
system 
continues 
underperform 
at global scale 

to 

Strength:  Does 
not  run  risk  of 
government 
failure 

Weakness: Fails 
to 
address 
entrepreneurial 
challenges 
facing EU 

Integrates 
Strength: 
research  and 
business, 
education  actors 
in  a 
bottom-up  development, 
with  an  assured  quality 
label 

limit 

Weakness: 
External 
the 
factors  may 
attractiveness  of  the  EU 
as  a  place  of  study.  No 
extend 
mechanism 
benefits 
beyond 
participating institutions 

to 

the 
Strength:  Builds 
capacity 
for 
entrepreneurship  through 
courses,  conferences  and 
practical actions 

Weakness: Small scale of 
investments limits returns 
to EU economy. 

Integrates 
Strength: 
research  and 
business, 
education  actors 
in  a 
bottom-up  development, 
with  an  assured  quality 
label.  Able  to  promote 
and  develop  EU  good 
practice  and  attract  talent 
to EU. 

External 
Weakness: 
the 
factors  may 
attractiveness  of  the  EU 
as a place of study.  

limit 

provides 

the 
Strength:  Builds 
capacity 
for 
entrepreneurship  through 
courses,  conferences  and 
practical actions. Scale of 
a 
actions 
‘visibility’ 
return. 
Reputation of EIT attracts 
private 
sector  venture 
capital.  Able  to  engage 
with  actors  both  within 
and  outside  of  the  KIC 
networks. 
and 
profile  of  EIT  activity 
enhanced 

Scale 

Principal 
Weakness: 
impacts  concentrated  in 
those 
territories  which 
have  a  strong  link  to  the 
EIT.  Risk  of  crowding 
venture  capital  out  from 
other investments 

the 
integrate 
To 
knowledge  triangle 
research, 
(of 
and 
innovation 
education) to create 
economic 
and 
social  value  and  to 
enhance  the  returns 
from  greater  levels 

Strength:  No 
risk 
rent 
of 
seeking 
behaviour 

Weakness: Fails 
provide 
to 
to 
incentives 
the 
draw 

Provides 
Strength: 
incentives 
to  develop 
integrated  networks  of 
research,  innovation  and 
education actors 

Weakness:  Risk  of  rent 
seeking  behaviour  and  of 
exclusive 
creating 

Provides 
Strength: 
incentives 
to  develop 
integrated  networks  of 
research,  innovation  and 
education 
actors. 
Development and sharing 
of  effective  means  of 
the 
integrating 
triangle. 
knowledge 

EN 

29 

   EN 

 
of collaboration and 
co-operation. 

knowledge 
triangle 
together 

networks 

to 

build 
Opportunity 
returns 
of 
evidence 
realised 
greater 
from 
levels  of  collaboration 
and co-operation 

Weakness:  Risk  of  rent 
seeking  behaviour  and  of 
exclusive 
creating 
networks 

Strength:  Opportunities 
to  develop  novel  and 
for 
effective  practices 
innovation 
and 
innovation governance  

Strength:  Opportunities 
to  develop  novel  and 
for 
effective  practices 
innovation 
and 
innovation governance.  

Weakness: 
No 
mechanism  to  share  the 
practices  developed  with 
actors outside of the EIT 

to 
Weakness:  Requires 
to 
set-up  mechanisms 
practices 
the 
share 
developed  with  actors 
outside of the EIT 

To 
address 
in 
disparities 
innovation  capacity 
across  the  EU  by 
and 
developing 
the 
sharing 
knowledge  of 
the 
new 
returns 
of 
models 
innovation practices 
and governance. 

to 

Strength:  Does 
provide 
not 
additional 
public  support 
to  places  which 
already 
have 
strong 
innovation 
capacity 

Weakness: Fails 
to  address  the 
of 
challenges 
those areas with 
weak 
innovation 
capacity 

Table 6.1 Strengths and weaknesses by option against the set objectives 

6.2. 

Effectiveness, efficiency and coherence 

In Table 6.2 the impact of the different options on effectiveness, efficiency and coherence is 
presented.  For  efficiency  two  criteria  are  taken  into  account:  the  cost  to  different  parties  of 
implementing the EIT and KICs (implementation costs) and the funds provided for the EIT by 
the  EU  (EU  Budget).  In  addition,  the  Administrative  Costs  of  implementing  the  EIT  under 
different options is considered which can be viewed as contributing to the efficiency of each 
Option.  Under  coherence,  both  internal  and  external  coherence  are  assessed.  Internal 
coherence is the coherence between the option and the objectives to be reached, while under 
external  coherence  the  contribution  to  the  relevant  overall  EC  policy  and  strategies  are 
assessed.  It  should  be  noted  that  the  impacts  cover  the  period  2014-20.  The  timescale  of 
effects  noted  previously  suggests  that  Option  3  and  Option  2  will  both  deliver  significant 
additional  impacts  post  2020.  This  will  improve  the  overall  cost-effectiveness  of  these 
Options as the benefits will increase whilst the costs are unchanged. A scorecard methodology 
is  used  and,  based  on  the  intensity  of  impacts,  Options  have  been  assessed  relative  to  the 
baseline  using  a  scale  ranging  from  (+)  to  (++)  for  positive  impacts  and  from  (-)  to  (--)  for 
negative ones. The table below summarises. 

EN 

30 

   EN 

 
Option 1   Option 2  Option 3 

Effectiveness 

To  promote  the  development  of  innovative  products  and 
processes  where  market  failures  lead  to  a  sub-optimal 

To  exploit  the  underutilised  potential  of the  EU’s  research 
strengths to deliver greater returns in the product and labour

To  strengthen  existing  and  potential  centres  of  research, 
innovation  and  educational  excellence  in  the  EU  to  produce 

To develop effective collaborative linkages between centres of 
excellence to create a critical mass for advanced innovation

To  enhance  the  attractiveness  and  commercial  relevance  of 
post-graduate  education  opportunities  to  attract,  develop  and 
retain appropriate skills across the EU
To strengthen the capacity for entrepreneurship across the EU 
to create new business activity and increased realisation of the 
potential value of research and educational outputs
To  integrate  the  knowledge  triangle  to  create  economic  and 
social value and to enhance the returns from greater levels of 

ll b

ti

d

ti

To address disparities in innovation capacity across the EU by 
developing  and  sharing  the  knowledge  of  the  returns  to  new 
models of innovation practices and governance
Efficiency 

Implementation costs 

EU budget 

Administrative costs 

Coherence (with strategic objectives, etc.): 

Table 6.2: Comparison of options 

- 

- 

-- 

- 

-- 

-- 

- 

0 

++ 

++ 

++ 

- 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

++ 

++ 

+ 

+ 

++ 

+ 

+ 

+ 

+ 

-- 

0 

+ 

Legend: (+) to (++) for positive impacts and from (-) to (--) for negative 

Option 1 

In  this  option,  where  EU  funding  to  the  EIT  ceases  from  2014,  the  impacts  are  reduced  in 
comparison  to  the  baseline  reflected  by  Option  2.  There  will  be  some  positive  benefits 
emerging from the actions begun prior to 2014 and through the continuation of some activities 
by the one or more of the KICs post 2014 using alternative resources. This makes the impacts 
achieved under this Option very cost-effective. Internal and external coherence is likely to be 
low as there are no co-ordination mechanisms available. However, a positive dimension here 
could be the reduced risks of induced government failures and market distorting behaviours.  

EN 

31 

   EN 

 
 
 
The  administrative  costs  of  the  option  will  be  decrease  significantly  as  the  activities  of  the 
EIT are assumed to cease. The costs of administrative expenditure, covering necessary staff, 
administrative, infrastructure and operational expenses until the wind up of the EIT activities 
will  not  exceed  1  %  of  the  EIT  Budget.  The ongoing  staff  contracts  should  be  finished  and 
indemnities  should  been  paid  to  the  actual  EIT  employees.  Only  some  employees  for  some 
residual activity might be maintained.  

Option 2 

The  impacts  of  this  option  are  taken  as  the  baseline.  The  impacts  of  this  Option  are  those 
which  the  current  KICs  are  projected  to  achieve.  The  positive  and  negative  effects  of  this 
Option  are  relatively  well-known  and  are  supported  by  the  external  evaluation.  In  terms  of 
cost-effectiveness the greatest weakness of this Option is its relatively small scale as it fails to 
achieve a critical mass. The internal and external coherence of this Option is positive but the 
value is reduced owing to the limited scope of the Option in that only three priority fields are 
developed.  One  area  where  coherence  is  weaker  is  in  terms  of  EU  objectives  promoting 
economic  convergence.  This  is  not  the  primary  objective  of  the  EIT.  The  distribution  of 
benefits is principally to organisations that are part of the KICs, and to the territories in which 
they are located. 

The cost-effectiveness of the Option is stronger than Option 1 because the EIT will maintain 
the scale of operation. Implementation costs will also be proportionately reduced as they will 
be spread across the actual number of KICs. The administrative costs of the option will not 
increase  significantly.  The  costs  of  administrative  expenditure,  covering  necessary  staff, 
administrative,  infrastructure  and  operational  expenses,  will  not  exceed  2  %  of  the  EIT 
Budget.  According  to  the  Host  Agreement  signed  with  the  Hungarian  Authorities,  the 
Hungarian  Government  will  contribute  to  the  general  budget  of  the  EIT  with  an  annual 
financial contribution of 1,560 million for the period 2011-2015 to cover staff costs for this 
period. The office space made available for free to the EIT by Hungary, as a host country, for 
a period of 20 years will notably reduce the EIT administrative expenditure.  

Option 3 

In comparison to the baseline Option, the returns of Option 3 are increased according to the 
number  of  additional  KICs  supported.  The  returns  from  these  actions  are  assumed  to  be 
constant.  This  is  a  conservative  assumption  for  the  number  of  KICs  being  proposed  as  it 
assumes that there are no gains to be made through cross-KIC collaborations. In practice such 
gains are likely to increase as the number of KICs  increase. There  will come  a point where 
efficiencies of scale become negative, but it is not believed that the number of KICs proposed 
under this Option will reach this point.  

The cost-effectiveness of the Option is stronger than the baseline Option because the EIT has 
reached a more efficient scale of operation. Implementation costs will also be proportionately 
reduced as they will be spread across a greater number of KICs. The administrative costs of 
the  option  will  not  increase  significantly  and  governance  arrangements  will  not  need  to  be 
amended from those of the reference case Option. The internal and external coherence of this 
Option  is  positive.  The  level  of  coherence  will  depend  upon  the  mix  of  additional  priority 
fields  selected  for  new  KICs.  The  one  area  where  coherence  is  weaker  is  in  terms  of  EU 
objectives  promoting  economic  convergence.  This  is  not  the  primary  objective  of  the  EIT. 

EN 

32 

   EN 

 
The distribution of benefits is principally to organisations that are part of the KICs, and to the 
territories in which they are located.  

The cost-effectiveness of the Option is stronger than Option 2 because the EIT has reached a 
more efficient scale of operation. Implementation costs will also be proportionately reduced 
as  they  will  be  spread  across  a  greater  number  of  KICs.  The  costs  of  administrative 
expenditure, covering necessary staff, administrative, infrastructure and operational expenses, 
will not exceed 2.16% of the EIT Budget. According to the Host Agreement signed with the 
Hungarian Authorities, the Hungarian Government will contribute to the general budget of the 
EIT with an annual financial contribution of 1,560 million for the period 2011-2015 to cover 
staff costs for this period. The office space made available for free to the EIT by Hungary, as 
a  host  country,  for  a  period  of  20  years  will  notably  reduce  the  EIT  administrative 
expenditure.  

Option  3  provides  also  positive  benefits  in  terms  of  extending  the  reach  of  the  EIT  to 
individuals, actors and territories which would not otherwise be able to engage with the EIT. 
It  promotes  greater  policy  coherence  in  areas  of  economic  convergence,  modernisation  of 
higher education and international relations.  

6.3. 

Risks associated with policy options  

There are some economic risks associated with Options 2 and 3 which are worth highlighting. 
These are set out in Table 6.3 below. The analysis is conceptual and based upon qualitative 
assessment.  The  risks  assessed  are  economic,  consumer  welfare,  environmental  quality  and 
health.  Owing  to  the  nature  of  the  policy  it  is  not  considered  that  there  is  a  significant  risk 
pertaining to health or environmental quality. Risks to consumer welfare are also considered 
to  be  low  as  it  is  deemed  unlikely  that  the  options  will  reduce  the  availability  of  goods  or 
services, or make those available significantly more expensive.  

There  are  two  principal  economic  risks.  The  first  is  the  risk  of  distorting  market  conditions 
and  creating  closed  ecosystems.  This  may  occur  if  the  establishment  of  KICs  as  integrated 
legal  entities  leads  to  collusive  behaviour  between  partners  involved  in  the  KIC.  The 
possibility  of  this  occurring  is  regarded  as  moderate  with  a  potential  moderate  impact  on 
economic  welfare.  If  the  KIC  develops  a  significant  market  share,  by  dint  of  bringing 
together,  all  or  the  majority  of  the  key  players  within  a  particular  market  then  there  is  the 
potential for anti-competitive behaviour to result. The probability of this occurring is low with 
the  risk  of  a  slight  impact  on  overall  economic  welfare.  Related  to  this  is  the  risk  that  EU 
actions  in  this  area  actually  reduce  the  level  of  innovation  by  limiting  the  number  of 
competing products/ideas through promoting a single provider of ideas in a particular market 
(the KIC). The risk of this occurring is judged to be low but will have a moderate impact on 
economic  well-being  if  it  does  occur.  Markets  may  also  be  distorted  if  EU  funds  simply 
subsidise  activities  which  would  have  occurred  anyway  and  thus  ‘crowd  out’  private  sector 
investment.  The  risk  of  this  occurring  is  regarded  as  high  with  a  moderate  impact  on  net 
economic  welfare.  Due  to  these  deadweight  risks  the  overall  risk  of  market  distortion  is 
regarded as moderate with a potential moderate impact on economic welfare.  

The  second  risk  is  that  EU  support  for  KICs  will  lead  to  disparities  in  economic  growth. 
Supporting  the  development  of  a  limited  number  of  centres  of  expertise  will  establish 
agglomeration economies and positive externalities which will reinforce the growth of these 

EN 

33 

   EN 

 
centres compared to other parts of the EU. The probability of this occurring is high whilst the 
magnitude of the effect on disparities in economic growth is likely to be moderate, all other 
things being equal. The establishment of integrated entities of firms and institutions of higher 
education and research may also create barriers to new market entrants in locations outside of 
the centres where these operate. This would be due to the greater difficulties that institutions 
outside  of  the  entities  have  to  access  knowledge,  finance  and  talent.  The  probability  of  this 
occurring is, however, low with the magnitude of the effect moderate if realized. 

Probability 

Magnitude 

Risk 

Consumer welfare 

Negative health impacts 

Environmental degradation 

Low 

Low 

Low 

Economic well-being 

Moderate 

Reduction in competing products 

Low 

Collusive behaviour 

Moderate 

Anti-competitive behaviour 

Deadweight 

Disparities in economic growth 

Agglomeration economies 

Barriers to market entry 

Table 6.3 Summary of potential risks 

Low 

High 

High 

High 

Low 

Slight 

Slight 

Slight 

Moderate 

Moderate 

Moderate 

Slight 

Moderate 

Moderate 

Moderate 

Moderate 

A potential risk is one of incomplete, or no, policy implementation. It is possible that calls for 
proposals  for  future  KICs  would  not  attract  interest.  Given  current  levels  of  interest  in  the 
topic, voiced by stakeholders and potential partners, this is believed to be unlikely – although 
as  the  number  of  KICs  increases  the  potential  correspondingly  increases.  Currently  there 
seems  to  be  sufficient  demand  for  at  least  6  further  KICs.  The  risk  of  incomplete  policy 
implementation – particularly where partners in KICs adopt a delayed activity profile as they 
seek  to  assess  actual  benefits  to  their  involvement  –  is  more  probable,  and  is  supported  by 
evaluative evidence. Here benefits might be delayed by up to two years per KIC where such 
behaviour occurs. Where firms and institutions find it difficult to appropriate the benefits of 
their innovations (owing to reasons such as a failure to protect intellectual property) then the 
economic impact of the EU investment may be reduced if the knowledge gains are developed 
outside  of  the  EU,  but  this  may  not  adversely  affect  the  impact  of  the  EIT  on  addressing 
societal challenges. 

Potential mitigation measures  

Potential mitigation measures for the more serious risks described above are, briefly, set out 
below: 

EN 

34 

   EN 

 
• 

• 

• 

Risk of deadweight effects – mitigation through strong monitoring by the EIT and 
the agreement of ‘stretch’ activity profiles. 

Risk  of  reinforcing  economies  of  agglomeration  –  some  mitigation  measures 
available through extension of the EIT activities as already reflected in Option 3.  

Risk of incomplete policy implementation – mitigation through strong monitoring 
by the EIT. 

6.4. 

Identification of the preferred option 

Options  2  and  3  meet  the  Objectives  of  the  EIT  most  strongly.  The  impact  of  Option  3  is 
greater than that of Option 2 owing to its greater scale. Its greater scale also gives Option 3 a 
greater cost-effectiveness than Option 2. The scale of Option 3 provides a further benefit in 
that  it  is  less  affected  by  the  potential  weakness  of  privileging  existing  networks.  This 
weakness is relatively greater for Option 2.  

Option 3 scores positively in terms of raising the international profile of the EIT, and, most 
significantly,  in  sharing  the  knowledge  generated  within  the  EIT  with  external  actors  and 
agents.  

Option 3 has two potential weaknesses. Firstly, its very scale may begin to introduce market 
distortions. This will not be the case in Option 1 and is less likely under Option 2. Secondly, it 
strengthens  existing  centres  of  excellence  and  risks  reinforcing  prevailing  disparities  in 
relative innovation performance between regions of the EU. Option 2 may also do so but to a 
lesser  extent.  However,  Option  3  offers  a  means  to  mitigate  some  of  these  territorial 
imbalances.  

Option 1 does not deliver against the objectives of the EIT in comparison to the baseline. Its 
main beneficial feature is that it involves no EU expenditure, whilst still reaping the benefits 
of  past  investments  in  the  KICs.  These  benefits  will  decay  over  the  period  of  the  coming 
Multiannual  Financial  Framework.  Were  there  evidence  of  significant  government  failure 
with  respect  to  the  EIT,  such  as  deadweight,  crowding-out  of  investment  or  misdirected 
investments then Option 1 would offer additional benefits. However, the external evaluation 
of the EIT did not find any evidence of such failures. 

On the basis of the evidence available, Option 3 is the preferred Option. 

7. 

MONITORING AND EVALUATION 

A sound monitoring and evaluation system is required for the EIT in order to record 
and report progress towards the achievement of its objectives. This is also one of the 
major recommendations of the EIT evaluation.  
The  evaluation38  made  a  number  of  strong  recommendations  regarding  the 
monitoring  and  evaluation  of  the  EIT.  It  stressed  the  importance  of  establishing 
robust monitoring procedures in association with the KICs, that the EIT should act as 

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a  challenging  partner  to  the  KICs,  and  that  the  EIT  should  adopt  a  culture  of 
‘openness’. The EIT should seek to develop a culture of continuous evaluation across 
the  EIT.  This  should  seek  to  evaluate  the  innovative  practices  being  implemented 
within  and  across  the  KICs  and  to  identify  the  returns  being  achieved  from 
investments  made.  The  EIT  should  seek  to  work  with  the  KICs  to  continuously 
improve performance and should seek to make available the lessons it has learnt to 
help improve performance elsewhere in the EU.  

7.1. 

The EIT monitoring and evaluation system 

The EIT evaluation addressed the EIT monitoring with two recommendations: 

Recommendation  4:  The  EIT  must  establish  robust  monitoring  procedures  in  association 
with the KICs. This should include the measurement of the performance of the EIT against its 
own objectives. The focus should be on establishing a results-based approach. An immediate 
priority is to use the results of such a monitoring procedure to assess the performance of the 
individual  KICs  and  of  the  EIT  overall.  The  challenges  of  developing  an  appropriate 
procedure is recognised by this evaluation, but the risks of adopting an inappropriate approach 
must also be acknowledged. We propose that the EIT consider inviting the Court of Auditors 
to  contribute  to  their  thinking  on  appropriate  monitoring  procedures.  The  Court  has 
previously  reported  that  it  would  welcome  early  involvement  in  the  development  of  similar 
monitoring frameworks. The procedures adopted will also need to satisfy the requirements of 
any audits undertaken by the Court of Auditors in the future. 

Recommendation 5: In its approach to monitoring the EIT should be a critical, challenging 
and  constructive  partner  for  the  KICs.  It  should  ensure  the  integration  of  the  knowledge 
triangle  in  practice  and  use  the  opportunity  of  the  divergent  approaches  being  taken  by  the 
KICs  to  test  the  effectiveness  of  different  approaches  and  to  learn  lessons  for  future 
applications.  The  monitoring  process  must  also  be  sufficiently  robust  to  guard  against  the 
known risks to the approach being taken with the KICs. It should ensure that the potential for 
deadweight is minimised, that added value is realised and that anti-competitive practices and 
market distortions are avoided. The EIT may wish to consider engaging an external partner in 
this process in order to emphasise the objective learning-based approach being facilitated.  

Box: EIT evaluation recommendations 4 and 5, EIT External expert evaluation of the EIT 

The  Commission  is  fully  committed  to  support  the  EIT  in  establishing  a  sound  and  solid 
results-oriented  monitoring  system  while  fully  respecting  the  contractual  relations  between 
the  EIT  and  the  KICs.  In  doing  so,  it  is  important  to  design  and  implement  the  monitoring 
system around with EIT with view of at least four key determining factors: 

• 

• 

• 

The  European  policy  level:  The  need  for  an  interface  between  the  EIT  and  the 
overarching Horizon 2020 monitoring system and the Innovation Union monitoring.  

The  EIT-Institute  level:  A  set  of  indicators  measuring  the  progress  of  the  EIT  own 
processes  and  activities  such  as  dissemination,  outreach,  human  resources 
development. The indicators should correspond to the objectives of an efficient and 
effective institution.  

The  cross-KIC-level:  A  common  set  of  SMART  indicators  applicable  across  all 
KICs, for example via a further development of the EIT Scoreboard (see Box below), 

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to be managed and applied by the EIT. The SMART indicators should correspond to 
the objectives of the EIT. 

• 

The individual KIC level: KIC have different business models and markets and thus 
different industrial KPIs. The KIC own KPIs shall be taken into account by the EIT 
in measuring the progress achieved against the objectives set in the annual Business 
Plans. The KIC own KPI should correspond to the objectives of the KIC. 

The EIT Scoreboard incorporates 9 measures and related indicators.  

1.  Develop  EIT  brand  and  label:  This  is  the  measure  of  the  EIT  brand  perception  by  the 
stakeholders, the “customers” and the public. In the short term, more pragmatic measures can 
be  used,  such  as  “KICs  organized  conferences”,  “other  activities  with  high  visibility”, 
“google search results”… but also “brand surveys” on specific criteria like entrepreneurship, 
contribution to societal challenge. The data should be collected yearly, or better, quarterly to 
create a dynamic of growth in the brand building. One indicator of immediate importance to 
the EIT brand is the set up of EIT labelled degrees and diplomas. Further examples include: 
independent assessment of brand influence/co-branded value of the EIT, KICs, Universities, 
enterprises; number of mentions of EIT in media; number of EIT/KIC website visits.  

2.  Create  new  business:  This  indicator  is  focused  on  new  spin-off  and  start-up  companies 
created by the KICs, and KICs employees. The data to be collected yearly is the number of 
spin-offs,  start-ups, their market value, as well as growth of  turnover and employment. The 
data is collected over the time. The KICs with their co-location centres are main sources of 
the  data.  Further  possible  measures  include:  societal  impact  including  number  of  not-for-
profits and social enterprises; number of new ventures created within partner SMEs and start-
ups; the amount of investment attracted into new businesses. 

3. Provide growth to existing businesses: The main stream of the contributions of the KICs 
to  business  development  goes  through  existing  service  companies  in  the  form  of  licensed 
tangible  and  intangible  results,  as  well  as  major  or  minor  improvements  in  products, 
processes and services of the companies. Apart from licensed results a big challenge with this 
indicator is identification of other contributions of the KICs and calculation of their value to 
the  companies.  For  practical  reasons  it  might  be  reasonable  to  concentrate  on  licenses  and 
other major results with their economic implications.  

4.  Attract,  keep  and  work  with  top-class  talents:  This  indicator  aims  at  evaluating  the 
attractiveness of EIT and of the KICs. It can be easily measured in the short term by counting 
the “number of top-class faculty, post-docs, PhD students and entrepreneurs in KICs” against 
specific criteria to be defined with each specific KIC. A further possible measure could be the 
ratio of applications to offers for education programmes.  

5.  Develop  educational  ecosystem  for  entrepreneurship:  Developing  en  educational 
ecosystem  for  entrepreneurship  can  be  approached  by  measuring 
the  number  of 
Entrepreneurship  training  courses  developed  and/or  taught  and  also  by  the  number  of  those 
actually  taught/led  by  entrepreneurs.  Further  possible  indicators  include:  breadth  of 
educational  activities  (masters,  PhD,  Executive);  number  of  students  that  have  completed 
entrepreneurship education programmes.  

6. Produce research and innovation breakthroughs: One possible indicator measures both 
the  quantity  and  the  quality  of  published  outputs.  Bibliometrics  provides  a  means  for 

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measuring collaboration within the KICs as well as partners outside the KICs (co-authorship 
of  papers).  A  second  indicator  measures  patents  as  intermediate  output  from  research, 
development and innovation processes. The total number of patents filed to the KICs would 
provide an indication of the success of the KICs in generating knowledge. The propensity to 
use patents as a means of protecting IP varies by industry and sectors and must be taken into 
consideration.  

7: Organize people mobility across co-location centres: The content of this indicator is the 
level of mobility across co-location centres and domains (education, research and academia). 
This  would  indicate  the  mobility  of  people  moving  between  co-location  centres  or/and 
domains  (education,  research  and  academia).  Further  examples  include  for  example  the 
number of secondments between academic and business partners.  

8.  Bring  together  partners  and  people:  The  content  of 
the 
global/international collaboration of the KICs by indicating the level of inward and outward 
KIC mobility. Examples includes long term (for example longer than 4 months) visitors, KIC 
staff outside, international collaborative ventures. The degree of cross-functional interactions 
within KICs could be measured by a Social Network Analysis tool. Further examples include 
for example Innovation events (e.g. number of open events, number of (closed) workshops, 
number of venture capitalists etc. attending). 

indicator 

this 

is 

9.  Attract  Contribution  from  third  parties:  Maximization  of  the  share  of  financial 
contribution  from  the  private  sector  is  one  the  aims  of  the  KICs.  In  addition  to  the  private 
sector,  this  indicator  includes  financing  from  all  third  parties,  or  financing  other  than  that 
provided by the EIT. This is financing from companies, funding from public national sources 
in EU and other countries, EU programmes, and funding from international organizations. An 
important  part  is  also  VC  financing  and  financing  coming  from  business  angels.  This 
indicator with its sub-categories measures attractiveness of the KICs among third parties, and 
commitment of key financiers to the KICs. 

Box: Strategic objectives of EIT Scoreboard and related indicators 

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Glossary 

EIT –European Institute of Innovation and Technology  

KIC –Knowledge and Innovation Community  

KIC InnoEnergy - this KIC addresses sustainable energy. 

Climate-KIC - this KIC addresses climate change mitigation and adaptation. 

ICT Labs KIC – this KIC addresses future information and communication society. 

RIC – Regional Innovation and Implementation Communities  

Knowledge  triangle  -  Research,  Education  and  Innovation  -  three  central  and 
strongly interdependent drivers of the knowledge-based society. 

Co-location  -  an  essential  notion  in  the  establishment  of  the  KICs  of  co-locating 
team members from diverse backgrounds. 

Co-location centre - a lead node in the network of participating nodes making up the 
KIC,  bringing  together  people  from  different  organizations,  sectors,  disciplines  and 
countries, united by common strategic objectives. 

ERC - the European Research Council  

MFF – Multi-annual Financial Framework 

SIA – Strategic Innovation Agenda 

IASG – Impact Assessment Steering Group 

IAB – Impact Assessment Board 

OPC – Open Public Consultations 

CSFRI - Common Strategic Framework for EU Research and Innovation 

EHEA – European Higher Education Area 

EU2020 - Europe 2020 - the EU's growth strategy for the coming decade aiming at 
the EU to become a smart, sustainable and inclusive economy. 

H2020 - Horizon 2020 Initiative - the European Commission initiative that aims to 
tackle the top sources of Mediterranean pollution by the year 2020. 
FP7 – 7th Framework Programme 

CIP - Competitiveness and Innovation Framework Programme 

IPR – Intellectual Property Rights 

JTI – Joint Technology Initiative 

EUREKA  -  a  Europe-wide  network  for  industrial  research  and  development, 
designed 
to  strengthen  EU  competitiveness  by  promoting  market-driven 
collaborative projects. 

ITEA – Information Technology for European Advancement 

SETIS – Strategic Energy Technologies Information System 

SET-Plan – Strategic Energy Technology Plan 

JRC – Joint Research Centre 

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PPPs – Public-Private Partnerships 

EIP – European Innovation Partnerships 

SMEs – Small and Medium Enterprises 

RTD – Research and Technological Development 

GVA – Gross Value Added 

Educational  spill  over  effect:  Knowledge  spill  over  is  enhanced  through  the  educational 
dimension  of  the  KICs.  This  combines  leading  industry  and  research  knowledge  which  can 
spin-out to a wider economic base through post-graduate employment routes. KIC activities 
also act to retain talent which, in turn, serves to promote additional levels of innovation.  

Cross-industry knowledge spill over effects: Innovations do not frequently ‘crossover’ into 
other  industries.  The  KIC  approach  emphasises  the  adjacent-industry  and  related-variety 
dimension of knowledge pullovers and promotes cross-industry innovation.  

Complementary 
innovation  effect:  The  KIC  provides  an  enhanced  potential  for 
complementary  innovation,  whereby  one  innovation  encourages  complementary  advances 
elsewhere  which  further  raise  productivity.  The  structure  of  the  KIC  enhances  this 
opportunity. 

Appropriation of benefits: The risk of non-appropriation of benefits is a critical factor in the 
underinvestment in innovation. The nature of the KIC increases the potential for research and 
innovation  advances  to  be  appropriated  by  members  of  the  KIC  and  reduces  the  likelihood 
that research/innovation will be lost to the market. The enhanced rate of return applying to the 
KIC compared to an individual partner also increases the likelihood of investment occurring. 

Technological  substitution:  Traditionally,  the  value  of  innovation  investment  defrays  over 
time  owing  to  the  increasing  substitution  of  technologically  superior  products.  As  the  KICs 
will  be  producing  a  flow  of  innovations,  the  technological  substitution  effect  is  assumed  to 
have a limited effect on levels of productivity over time.  

Collaboration between academic research and business: The EIT could generate feedback 
from business  into research, both in terms of research needs  and in terms of doing research 
differently in order to make it more useful for business. 

Annex: Assessment of EIT Options 

Annex: Complementarity 

Annex: ClimateKIC-fiche 

Annex: KICInnoEnergy-fiche 

Annex: ICTLabs-fiche (DISCLAIMER: This fiche is not public information and cannot be 
published.) 

Annex: KICBudget 2011  

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