COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS State of the Innovation Union 2012 - Accelerating change
Date: 2013-03-21
Institutions: European Commission
Subjects: aid to undertakings, economic growth, economic recession, innovation, intellectual property, research and development

EUROPEAN 
COMMISSION 

Brussels, 21.3.2013  
COM(2013) 149 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

State of the Innovation Union 2012 - Accelerating change 

(Text with EEA relevance) 

{SWD(2013) 75 final} 

EN 

   EN 

 
 
 
 
  
 
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

State of the Innovation Union 2012 - Accelerating change 

(Text with EEA relevance) 

1. 

INTRODUCTION 

The  Europe  2020  strategy  and  its  ʻflagshipʼ  initiatives  focus  on  investments  in  education, 
research  and  innovation  as  the  key  to  achieving  smart,  sustainable  and  inclusive  growth.  In 
this  context,  the  Innovation  Union  flagship  initiative,  together  with  the  Digital  Agenda, 
Industrial Policy and Resource Efficient Europe flagships, and the Single Market Act, aim to 
create the best conditions for Europe's researchers and entrepreneurs to innovate.  

The  Innovation  Union  flagship  in  particular  is  about  creating  a  vibrant,  innovation-based 
economy fuelled by ideas and creativity, capable of linking into global value chains, seizing 
opportunities,  capturing  new  markets  and  creating  high-quality  jobs.  Overall,  progress 
towards  setting  up  the  policy  framework  for  an  Innovation  Union  has  been  very  positive: 
more than 80% of the initiatives are on track. The call by the Heads of State and Government 
to  deepen  the  European  Research  Area  is  being  turned  into  concrete  actions.  The 
Commission's  ʻHorizon  2020ʼ  proposal  for  a  future  European  research  and  innovation 
programme marks a clear break with the past by covering the entire value creation chain in 
one single programme. The principle of ʻsmart consolidationʼ — i.e. protecting or, if possible, 
increasing  growth-friendly  expenditures,  such  as  R&D  —  is  now  widely  accepted  and  is 
embedded in the European Semester. The business environment in Europe will become more 
innovation-friendly  thanks  to  Single  Market  measures  such  as  the  unitary  patent,  faster 
standard  setting,  modernised  EU  procurement  rules  and  a  European  passport  for  venture 
capital  funds.  European  Innovation  Partnerships  are  pooling  resources  and  concentrating 
demand and supply-side measures on key societal challenges. While these measures still need 
to  be  implemented  to  start  bringing  results,  they  represent  a  fundamental  shift  in  the  right 
direction. 

The  global  position  of  Europe  is  still  relatively  strong.  The  EU  is  one  of  the  world's  best-
performers when it comes to producing high-quality science and innovative products. It still 
captures  the  largest  and  a  stable  share  (28%)  of  income  generated  in  global  manufacturing 
value  chains  while  the  US  and  Japan  saw  their  shares  shrinking.  Since  2008,  the  EU  has 
improved its innovation performance and it closed almost half of the innovation gap with the 
US and Japan1. The EU is also keeping its strong innovation lead over Brazil, India, Russia, 
and  China,  although  the  latter  is  most  markedly  catching  up.  In  addition,  South  Korea  has 
almost tripled its innovation lead over the EU since 2008 and joined the US as an innovation 
leader.  

Furthermore,  while  public  R&D  spending  in  the  EU  grew  throughout  the  crisis  as 
governments strived to keep up their R&D investments and thus incentivise businesses to do 
likewise, recent data point to a potential reversal of this trend. In 2011, for the very first time 
since the beginning of the crisis, the total public R&D budget of the 27 EU Member States 
decreased slightly. 

1 

Innovation Union Scoreboard 2013 

EN 

2 

   EN 

 
                                                 
The on-going economic crisis has also exposed structural weaknesses in Europe's innovation 
performance. The 2013 Innovation Union Scoreboard shows that the process of convergence 
in the innovation performance of Member States has come to a halt. As convergence was the 
dominant pattern since the introduction of the Scoreboard in 2001, this signals a clear risk of 
an  increasing  innovation  divide2.  As  the  crisis  gets  longer  and  deeper,  growth  disparities 
between some European regions are increasing, there is an even stronger need to implement 
the Innovation Union swiftly and deepen it in the areas crucial to innovation, such as higher 
education,  innovation-based  entrepreneurship  and  demand-side  measures.  Momentum  in 
fields like social innovation will also need to be maintained.  

Europe  therefore  needs  fresh  dynamism  in  its  economy.  Existing,  traditional  industries  in 
which Europe excels need to develop new applications and new business models in order to 
grow and maintain their competitive advantage. Furthermore, in dynamic fields such as ICT-
based  businesses  and  in  emerging  sectors  Europe  needs  more  high-growth  firms.  This  calls 
for an innovation-driven structural change, but Europe is at present missing out on the more 
radical innovations which drive and lead such structural change. Consequently, what Europe 
needs most in the next decade is to attract top talent and reward innovative entrepreneurs, to 
offer them much better opportunities to start and grow new businesses 

Against this background, this communication: 

• 

• 

summarises  progress  at  Member  State  and  European  levels  towards  achieving  an 
Innovation Union in 2012, and 

concludes by outlining areas where the Innovation Union can be deepened, including 
by drawing on the Innovation Union stress test carried out by the European Research 
and Innovation Area Board3. 

2. 

THE STATE OF NATIONAL RESEARCH AND INNOVATION SYSTEMS 

2.1. 

Investing for the future  

Europe  needs  more  and  better  investment  in  research  and  innovation  to  support  the 
competitiveness of its industry and to upgrade its research and innovation system. Public and 
private investment in R&D is crucial to enable Europe to take advantage of any rebound in 
the  economy.  The  recovery  in  2010  was  substantially  stronger  in  countries  which  had 
previously invested the most in R&D and innovation (e.g. Germany, Finland and Sweden)4.  

Public and private investment in R&D was growing up to the economic crisis. Following the 
outbreak  of  the  crisis,  a  majority  of  Member  States  maintained  or  increased  their  R&D 
investments, despite fiscal constraints, and overall R&D spending over GDP increased from 
1.85% in 2007 to 2.03% in 2011. However, in eleven Member States5 it has grown less than 
GDP since the beginning of the crisis (Figure 1). 

Figure 1: Protecting public R&D spending 

2 
3 

4 
5 

EN 

Idem. 
1st Position paper of the European Research Area and Innovation Board (ERIAB): "Stress-test" of the 
Innovation 
at 
http://ec.europa.eu/research/era/partnership/expert/eriab_en.htm  
State of the Innovation Union 2011, COM (2011) 849  
For some of these Member States, the difference can be partly compensated by foregone tax revenues 
due to the use of fiscal incentives for R&D investment. 

forthcoming 

November 

Union; 

2012, 

3 

   EN 

 
                                                 
Government investment in the future 
The difference in percentage points between real growth (1) in Government budgets for R&D (GBAORD(2)) 
and real growth (1) in GDP, 2008-2012 (3) 

i

)
s
t
n
o
p
e
g
a
t
n
e
c
r
e
p
(

P
D
G
n

i

h
t

w
o
r
g

l
a
e
r
s
s
e
l

D
R
O
A
B
G
n

i

h
t

w
o
r
g

l
a
e
R

40

30

20

10

0

-10

-20

-30

-40

-50

Source:  DG Research and Innovation - Economic Analysis Unit                                                                  

Data:  Eurostat

Notes:  (1) Real growth was calculated from values in PPS€ at constant 2000 prices  and exchange rates.

             (2) Foregone tax revenues resulting from R&D tax incentives are not included.

             (3) EL: 2007-2008; PL: 2009-2011; BE, BG, DE, IE, ES, FR, CY, LV, LT, HU, SI, SK, SE, UK, EU: 2008-2011;

             (4) Data for 2012 are provisional.

Overall,  businesses  in  the  EU  also  increased  their  expenditure  on  R&D  as  a  share  of  GDP 
from  2007  (1.18  %)  to  2011  (1.27  %).  This  is  in  part  due  to  sustained  R&D  investment  by 
European  firms  which  expect  their  worldwide  investments  in  R&D  to  grow  further  by  an 
average of 4 % annually over the period 2012 – 20146. Europe is also an attractive place for 
foreign  firms  to  invest  in  R&D  and  they  have  done  so  heavily.  US  firms  account  for  two-
thirds of internationally mobile R&D investments and their annual R&D spending in Europe 
is 10 times greater than the amount they invest in China and India combined7.  

However, there are large differences between Member States and between industrial sectors 
and  actors.  Some  countries  are  seeing  a  fall  in  R&D  investment  in  the  business  sector,  in 
particular by SMEs. This is mostly due to low business confidence in the future prospects of 
the European economy, despite cash reserves piling up in many companies' balance-sheets8. 
From  a  sectoral  perspective,  many  countries  have  seen  an  increase  in  R&D  intensity  in  the 
more  traditional  medium-tech  industries  (e.g.  metals,  rubber  and  plastics,  food  products)  as 
well  as  in  growing  markets  driven  by  societal  challenges  such  as  waste  treatment,  clean 
energy and water. Overall, the EU remains specialised in medium-high R&D-intensity sectors 
which account for half of European companies' R&D investment. By contrast, more than two-
thirds of US companies' R&D investment is clustered in high R&D-intensity sectors (such as 
health and ICT)9.  

6 
7 

8 
9 

EN 

The 2012 EU Survey on R&D Investment Business Trends , European Commission, 2012 
'Internationalisation of business investments in R&D and analysis of their economic impact', European 
Commission, 2012, http://ec.europa.eu/research/innovation-union/index_en.cfm?pg=other-studies.  
'Dead money', The Economist, 3 November 2012 
The  2012  EU 
http://iri.jrc.ec.europa.eu/research/scoreboard_2012.htm 

scoreboard,  European  Commission,  2012, 

Industrial  R&D 

investment 

4 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Figure 2: R&D investment by US and EU companies by sector group 

Source: 2012 EU Industrial R&D investment scoreboard 

EU 2011

7%

6%

Pharma  & Biotech

37%

ICT-related

US 2011

1%

4%

Pharma  & 
Biotech

Other 
medium-
high

Aerospace 
& defence

Chemicals

25%

Electronic 
& Electrical 
Equipment

69%

Other  high

Automobile
s  & parts

Other  high

ICT-related

Other  medium-high

Aerospace  &
defence

Chemicals

50%

Electronic & Electrical 
Equipment

Automobiles  & parts

EU 2003

5%

6%

Pharma  & 
Biotech

Other 
medium-high

Aerospace  & 
defence

36%

ICT-related

Chemicals

53%

Other  high

Other 
medium-
high

Chemicals

Electronic 
& Electrical 
Equipment

Automobile 
& parts

Electronic & 
Electrical 
Equipment

Automobile  & 
parts

Other  high

High

Medium-High

Medium-Low

Low R&D intensity

US 2003

3%

1%

Pharma  & 
Biotech

31%

65%

ICT-related

Furthermore,  in  Member  States  where  the  business  sector  is  knowledge-intensive  and 
internationally  competitive,  the  governments'  strategy  to  protect  R&D  spending  helped 
maintain the level of private investment10. However, this proved more difficult for countries 
suffering from sovereign debt crisis. In these countries, liquidity constraints combined with an 
insufficiently  innovation–friendly  environment  and  a  lower  level  of  business  demand  for 
knowledge  undermined  the  effectiveness  of  the  counter-cyclic  efforts  to  stimulate  business 
investment. This shows that investing in knowledge must go hand in hand with reforms in the 
research  and  innovation  system  including  innovation-friendly  framework  conditions  for 
innovative businesses.  

While most Member States have applied a policy of smart fiscal consolidation to their public 
investments  in  R&D  and  innovation,  there  is  a  risk  now  that  the  exceptional  length  and 
harshness  of  the  current  crisis  is  beginning  to  undermine  the  policy  consensus  that  such 
investments need to be protected. In 2011, public R&D budgets11 decreased for the first time 

10 

11 

When  asked  about  effects  of  policies  and  external  factors  on  their  innovation  activities,  top  EU 
companies highlight the strong positive effects of fiscal incentives, national grants, EU financial support 
and public-private partnership both at national and EU level (source: see footnote 4). 
Government budget appropriations or outlays for R&D (GBAORD). 

EN 

5 

   EN 

 
 
                                                 
since  the  beginning  of  the  crisis,  though  this  is  being  partly  compensated  by  an  increase  in 
foregone  tax  revenues  due  to  fiscal  incentives12.  Comparing  Member  States'  public  budgets 
for R&D 2011 and 2012, the number of countries which maintained or increased their public 
spending is also shrinking. This presents a clear threat of hollowing out Europe's innovation 
performance and endangering future competitiveness.  

When looking at the entire knowledge triangle (education, research and innovation), we see a 
similar  pattern.  In  2009,  all  but  two  Member  States  maintained  or  increased  their  public 
spending on education13. Since then, the continued pressure on public finances has led many 
governments to cut investments in education14.  

2.2. 

Reforming to raise efficiency and effectiveness 

At times of fiscal constraint, it is even more important to reform, to get the most out of the 
money invested. There are still considerable differences between Member States in terms of 
their  research  and  innovation  efficiency.  For  a  given  amount  of  public  investment,  some 
countries achieve more excellence than others in science and technology (Figure 3).  

Clearly  therefore,  although  each  national  context  calls  for  specific  solutions,  a  full 
deployment  of  the  European  Research  Area  would  trigger  substantial  efficiency  gains  in 
knowledge and technology capacities. The most successful Member States have managed to 
increase  the  scientific  quality  and  economic  impact  of  their  science  base,  while  others  still 
face efficiency problems or make little impact with their public investments.  

12 
13 
14 

Science, Technology and Industry Scoreboard 2011, OECD . 
European Commission Staff Working Document ' Education and Training Monitor 2012' 
European  Commission  COM(2012)  669/3  'Rethinking  Education:  Investing  in  skills  for  better  socio-
economic outcomes' 

EN 

6 

   EN 

 
                                                 
Figure 3. Investment and research excellence15 

)
0
1
0
2
(

)
3
(

e
c
n
e
l
l
e
c
x
e
T
&
S

100

90

80

70

60

50

40

30

20

10

0

0.0

NL

DK

SE

FI

DE

AT

FR

BE

UK

IT

CZ

PT

IE

HU

ES

SI

EE

LU

LT

EL

PL

CY

RO

BG

MT

SK

R² = 0.7198
corr. = 0.848 

LV

0.2

0.4

0.6

0.8

1.0

1.2

Average public R&D intensity(1) (%), 2004-2010(2)

Source:  DG Research and Innovation - Economic Analysis unit                                                                

Data:  Eurostat

Notes:  (1) Average public R&D intensity (public Gross Domestic Expenditure on R&D as % of GDP).

            (2) EL: 2004-2007; SE, IT: 2005-2010; DK: 2007-2010, LU: 2009-2010.

            (3) Composite indicator on Research excellence (feasibility study of JRC)

Many  EU  Member  States  have  launched  ambitious  policy  reforms  in  order  to  make  their 
research  and  innovation  system  more  efficient,  in  line  with  the  objectives  of  the  European 
Research Area16. Several of these reforms were initiated before the crisis, but they have since 
been  extended  or  deepened.  Also,  the  economic  crisis  has  led  to  a  stronger  integration  of 
research and innovation in the broader national industrial and macro-economic policies. New 
innovation  bills  and  national  strategies  for  research  and  innovation  are  being  drawn  up  or 
implemented  in  several  countries,  and  many  governments  are  linking  innovation  to  broader 
reform packages on entrepreneurship, the business environment and the labour market, with a 
strong focus on better commercialisation of research results.  

Member  States  and  Associated  Countries  have  reported  a  range  of  National  Action  Plans, 
programmes,  strategies  and  legislative  acts  aimed  at  ensuring  that  they  train  enough 
researchers to meet their national R&D targets17. In many cases, it is too early to measure the 

15 

16 

17 

EN 

The linear interpolation indicates the correlation between the two variables in Figures 3 and 5. The size 
of the bubble reflects the size of the economy (as a share of EU GDP).  
'Country profiles : description of the performance and key features of Member States’ research and 
innovation systems' , Staff Working Document accompanying the communication 
Innovation, 
Research 
´Researchers' 
http://ec.europa.eu/euraxess/pdf/research_policies/121003_The_Researchers_Report_2012_FINAL_RE
PORT.pdf  

commissioned 

by  DG 

Report 

2012, 

and 

7 

   EN 

 
 
 
                                                 
direct or indirect impact of these measures. However, the tendency at present is to have issue-
based policies and action plans, which do not necessarily form a coherent whole. A key step 
will  be  to  move  towards  a  single  integrated  strategy  addressing  human  resources  issues  in 
the research profession.  

Most  Member  States  have  also  designed  or  implemented  legislative  changes  increasing  the 
autonomy  of  universities.  Some  have  introduced  new  employment  conditions  for  public 
sector  researchers  that  allow  them  to  work  with  the  private  sector  and  commercialise  their 
scientific findings and technological inventions.  

Measures  are  being  put  in  place  to  support  the  internationalisation  of  public  and  private 
research actors, and in particular their integration in European-wide networks of knowledge 
flows.  Member  States  are  increasingly  considering  the  benefits  of  integrating  their  national 
research and innovation systems into global and European systems in order to tap into global 
value  chains  and  address  innovation  demand  from  new  international  markets.  To  this  end, 
programmes  promoting  R&D  have  to  open  up  to  international  partners  and  cross-border 
collaboration,  which  will  strengthen  complementarity  of  value  chains  across  countries. 
Public-private collaborations and the internationalisation of firms are at the core of the strong 
cluster policies that have been developed in many Member States in recent years. 

Cross-border mobility is still relatively low. Researchers who do move tend to do so from 
the public sector to the private sector, but the flow in the other direction is marginal, as is any 
flow  back  and  forth.  Despite  progress  in  student  mobility,  too  few  universities  and  public 
research  organisations  recruit  foreign  professors  or  recognise  the  importance  of  gaining 
international experience for their staff18. There are scarce promotion prospects for innovative 
researchers  collaborating  with  the  business  sector  and  effective  knowledge  transfer  is  only 
visible  in  the  most  dynamic  Member  States.  Funding  under  most  national  and  regional 
research programmes is still largely closed to participants based in another Member State, and 
Europe thus misses opportunities for excellence and cross-border knowledge flows.  

Getting the most out of public research funding requires a sound level of competition. This 
can  be  achieved  through  project  funding  (open  calls  for  proposals)  and  performance-based 
institutional  funding  linked  to  scientific  excellence,  internationalisation,  and  collaboration 
with  business.  More  Member  States,  however,  need  to  embrace  a  move  towards  more 
competitive funding: so far, only a handful of countries have set in place an effective funding 
allocation mechanism providing incentives for excellence. Too often, institutional funding is 
allocated to universities and public research organisations without any performance criteria or 
real evidence-based monitoring. When allocation is de-coupled from performance, individual 
researchers  and  institutions  have  few  incentives  to  engage  in  European-wide  networking  or 
competition, to strive for excellence or to cooperate with the private sector.  

Member  States  are  increasingly  focusing  on  creating  an  innovation-friendly  business 
environment. The most widely-used measures are fiscal incentives for R&D investments or 
innovation  vouchers  for  companies  wishing  to  buy  services  from  R&D,  technology  and 
innovation  services  providers.  Some  Member  States  are  also  reducing  tax  rates  on  profits 
from  patents  and  other  types  of  intellectual  property.  There  is  strong  support  for  providing 
easier access to risk capital for companies at their seed, start-up and early-growth stages, and 
for innovative projects.  

18 

See annex Country profiles: description of the performance and key features of Member States' research 
and  innovation  systems'.  Information  can  also be found  in  the Impact  Assessment  annexed  to  the  EC 
communication "A Reinforced European research Partnership for excellence and growth", 17.07.2012 
(COM 2012 392 final) 

EN 

8 

   EN 

 
                                                 
In  national  policy  mixes,  however,  there  are  still  imbalances  between  supply  push  and 
demand  pull.  Supply-side  instruments  such  as  grants,  subsidised  loans  and  tax  incentives, 
constitute over 90 % of the measures used19. Only a few countries are actively using demand-
side  measures  (e.g.  through  public  procurement,  standards  or  regulation)  to  help  develop 
markets  for  innovative  solutions.  Nevertheless,  many  other  Member  States  have  begun 
discussing or piloting such measures and are expected to start implementing them soon. The 
development  of  new  markets  is  mostly  supported  in  the  areas  of  sustainability,  energy 
efficiency and e-government applications.  

2.3. 

Leading change Towards More Innovation in Europe  

The crisis and increasing globalisation have changed the rules of the game. Strategies based 
on  investing  in  knowledge  and  getting  the  most  out  of  the  existing  national  research  and 
innovation  systems  are  very  important,  but  not  enough.  The  European  economy  needs  a 
radical  shift  in  business  dynamics  towards  high-growth  and  knowledge-intensive  global 
markets with potential for creating more and better jobs. This assessment is supported by the 
data illustrated in Figure 4, showing that economies where the economic impact of innovation 
is the largest, have a higher employment rate. 

Figure 4: Economic impact of innovation is positively correlated to employment  

)
1
1
0
2
(

e
t
a
r

t
n
e
m
y
o
p
m
E

l

85.0

80.0

75.0

70.0

65.0

60.0

55.0

R² = 0.3098
corr. = 0.556

SE

NL

DK

DE

AT

CY

UK

FI

CZ

LU

PT

EE

SI

FR

LT

LV

BG

PL

SK

RO

ES

HU

MT

EL

BE

IT

IE

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Index of economic impact of innovation  (2010-2011)

Source: DG Research and Innovation - Economic Analysis unit (2013)

Data: Eurostat, Innovation Union Scoreboard 2013

It  is  widely  recognised  that  Europe  needs  its  economic  fabric  to  be  renewed  and  oriented 
towards sectors which are tomorrow’s markets and where it can build sustainable competitive 
advantages, based on its highly educated workforce. Such structural change is not yet taking 
place at the required pace. In order to hasten the renewal of Europe’s economic fabric, policy-
makers urgently need to focus policy efforts on one of the main channels for such renewal: 

19 

ERAC's Opinion on the Commission's Annual Growth Survey, February 2012 

EN 

9 

   EN 

 
 
 
 
                                                 
the growth of innovative firms. By doing so, they will address a key bottleneck to Europe’s 
economic performance.  

Studies have indeed shown that, while there are fewer high-growth innovative firms in Europe 
than  in  the  US,  overall  employment  growth  depends  critically  upon  them:  the  number  and 
share of high-growth firms may be small but the number and share of the jobs they generate 
directly or indirectly is disproportionately large. Moreover, high-growth innovative firms are 
essential for productivity growth, as the main channel for such growth is the re-allocation of 
jobs  from  firms  with  low  productivity  to  more  productive  ones:  it  has  been  estimated  that 
differences in firm growth dynamics between the US and the EU account for over two thirds 
of the EU’s underperformance vis-à-vis the US in productivity growth in recent decades. 

National  policy-makers  would  benefit  from  reviewing  all  the  aspects  of  their  ‘national 
entrepreneurship  and  innovation  system’  that  may  constitute  bottlenecks  to  the  growth  of 
innovative  firms.  Based  on  existing  empirical  evidence,  policy  actions  should  focus  on  the 
following key aspects in particular:  

• 

• 

• 

• 

• 

20 

Several  aspects  of  the  regulatory  framework  are  very  important  for  firm  growth 
dynamics:  Member  States  need  to  address  any  disincentives  to  growth  present  in 
their  regulations.  This  may  concern  for  instance  a  modernised  standard-setting  and 
well-performing  labour  markets.  Also  bankruptcy  regimes  that  severely  penalise 
‘failed entrepreneurs’ have been found to discourage high-growth entrepreneurship. 
More  high-growth  firms  may  also  mean  more  cases  of  failure.  Beyond  legislation, 
there is a need for change in social attitudes towards entrepreneurs who have failed. 

Access  to  debt  and  equity  finance  is  of  course  essential  for  enabling  high-growth 
entrepreneurship.  While  many  Member  States  have  already  developed  policies  to 
address this issue, this might still be an important bottleneck, particularly in Member 
States  with  less  developed  financial  markets.  In  that  respect,  the  EU  Regulation 
creating a European Venture Capital Fund adopted in 2012 is a major step forward as 
it  will  make  it  easier  for  venture  capitalists  to  raise  funds  across  Europe  for  the 
benefit of start-ups and SMEs20.  

The specific target of fostering the development of young innovative firms needs to 
be fully integrated in the design of research and innovation policy tools. While many 
Member States have developed tax incentives to support R&D activities in all types 
of  companies,  there  is  a  need  to  offer  specific,  more  favourable  tax  treatment  for 
young innovative companies. 

There is a close link between growth, innovation and internationalisation. Exporting 
and innovation are mutually reinforcing strategies that result in higher export shares, 
turnover  and  employment  growth  at  the  firm  level.  Policies  supporting  innovation 
and  internationalisation  should  link  up.  In  that  respect,  cluster  policies  can  be  a 
critical tool, not least to support the internationalisation of young innovative firms.  

Young radical innovators also face problems in protecting their intellectual property. 
Targeted or more general policies increasing both the supply of (public) capital and 
the access to such capital and policies both improving the IPR system and making it 
less costly will be beneficial to all enterprises that grow and that want to innovate but 
in  particular  to  high-growth  innovative  enterprises.  Sharing  and  professionalising 

In addition, the Commission will publish in the coming weeks a green paper on long-term financing of 
the  European  economy  where  the  drivers  and  constraints  to  long  term  financing  as  well  as  ideas  for 
action and possible new instruments/initiatives will be presented. 

EN 

10 

   EN 

 
                                                 
• 

• 

access  to  IPR  portfolios,  e.g.  through  patent  pools  within  clusters,  can  also  be 
instrumental in developing innovation on a larger scale in Europe. 

Gearing  the  R&D  system  towards  knowledge  transfer,  and  in  particular  improving 
the  linkages  between  the  science  base  and  the  business  sector,  is  of  primary 
importance  for  the  creation  and  growth  of  technology-based  innovative  companies. 
Many  Member  States  have  already  developed  policies  to  boost  the  commercial 
exploitation  of  R&D;  these  policies  need  to  be  further  implemented,  enhanced, 
evaluated and renewed accordingly.  

to  foster 

is  essential 

the  specific  development  of  an 

It 
innovation  and 
entrepreneurship  culture  and  attitude,  not  least  through  the  education  system. 
Stimulating  growth  ambitions  in  new  and  existing  innovative  businesses  and 
supporting  the  provision  of  training,  skills  upgrading  opportunities  and  qualified 
coaching  in  young  and  small  enterprises,  e.g.  in  relation  to  the  management  of 
innovation and rapid growth, has received less attention in policies aimed at fostering 
firms’ growth.21 

The above considerations are central to achieving the Europe 2020 objectives and focusing on 
horizontal policies that seek to provide a fertile breeding ground for the emergence of high-
growth innovative enterprises. 

In  addition  to  efforts  at  regional  and  national  level,  these  priorities  should  be  supported  by 
concerted efforts at EU level in order to create an innovation friendly business environment 
across Europe. Measures of this kind are outlined in the next section. 

3. 

PROGRESS IN BUILDING AN INNOVATION UNION  

In 2012, good progress was made in implementing the Innovation Union. More than 80% of 
commitments are on track with on-going initiatives. In a few areas efforts need to be stepped 
up.  These  include  a  more  strategic  use  of  innovation  procurement,  adoption  of  the  Single 
Market Act I proposals and rolling out the initiatives on the intellectual property valorisation. 
This section focuses on key policy actions of 2012. A short overview on the state of play of 
all 34 commitments of the Innovation Union is provided in the annex.  

3.1. 

Strengthening the knowledge base and reducing fragmentation 

Promoting excellence in education and skills development 

Current  skills  mismatches  and  shortages  of  scientists  and  engineers  present  a  threat  to 
Europe's innovation capacity, precisely at a time of increasing technological needs. In 2012, 
the Commission presented the Rethinking Education Communication22. It focuses on the need 
to  develop  transversal  skills  such  as  critical  thinking,  problem  solving,  team-working  and 
entrepreneurial skills and to enhance academia-business partnerships.  

The  first  Knowledge  Alliances  projects  are  under  way.  Their  aim  is  to  set  up  cross-sector 
partnerships between employers and educational bodies to address skills mismatches, e.g. in 
the  audio-visual  industry  (CIAKL  project),  in  manufacturing  by  integrating  factory  and 
classroom environments (KNOW-FACT project) and by fostering an entrepreneurial spirit in 
students  and  staff  (EUEN  project).  Further  projects  will  follow  in  2013,  and  from  2014 
onwards Knowledge Alliances will be part of the new Erasmus for All programme.  

21 

22 

European Commission (2011), Policies in support of high-growth innovative SMEs, INNO-Grips Policy 
Brief No 2. 
COM(2012)669 

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11 

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In addition, a multi-dimensional and international ranking of higher education institutions has 
started implementation in 2012 following the conclusions of a feasibility study.  

Delivering the European Research Area 

The  conditions  are  not  yet  in  place  for  achieving  the  European  Research  Area  (ERA)  –  by 
2014.  ERA  is  a  unified  research  areas  based  on  the  Internal  Market.  ERA  is  part  of  the 
Innovation Union and Horizon 2020 supports its implementation in many ways. It is one of 
the key structural reforms to drive growth in Europe – and is increasingly recognised as such. 
While  progress  to  date  has  been  slow,  the  Commission  proposed  a  reinforced  European 
Research Area Partnership for Excellence and Growth23.  Its focus and a clear set of  actions 
were endorsed by the Competitiveness Council at its meeting on 11 December 2012. Under 
the reinforced partnership, the Member States, stakeholder organisations and the Commission 
will  work  together  to  enhance  the  effectiveness  and  efficiency  of  the  European  public 
research  system.  They  will  do  so  by  encouraging  more  openness  and  competition,  greater 
mobility  for  researchers,  more  cross-border  cooperation  and  an  optimal  circulation  of 
knowledge.  Progress  towards  achieving  the  ERA  will  have  to  be  monitored  in  close 
connection  with  the  European  Semester.  It  will  also  need  top-level  steering  by  the  Council, 
informed  by  regular  dialogue  with  all  stakeholders.  The  Commission  will  develop  a  robust 
ERA monitoring mechanism in close cooperation with the Member States.  

The combined effect of the EU reaching the 3% target of GDP dedicated to research, Horizon 
2020, and an increased share of transnational funding (currently 0.8%) thanks to achieving the 
ERA, could generate as much as € 445 billion of additional GDP and 7.2 million extra jobs by 
203024.  

The  Commission's  proposal  for  Horizon  2020  contributes  to  the  establishment  and 
functioning of ERA, for example by making open access to scientific publications a general 
principle of Horizon 2020. The Commission has also recommended that Member States take a 
similar approach to the results of research funded under their own national programmes25.  

Excellent research does not happen in a vacuum. It requires the best research infrastructures 
as  platforms  for  collaboration  to  address  research  issues  that  cannot  be  addressed  by 
individual  Member  States  or  regions  acting  alone.  The  Commission  and  the  Member  States 
are together making progress on building the 48 priority research infrastructures identified in 
2010 by the European Strategy Forum on Research Infrastructures (ESFRI). About 27 of them 
are expected to be under implementation during 2013.  

Extreme  Light  Infrastructure  is  a  distributed  infrastructure  hosted  in  the  Czech  Republic, 
Hungary and Romania. It forms a pan-European Laser facility which is expected to hold the 
world's most intense lasers. It involves nearly 40 research and academic institutions from 13 
EU  Member  States.  The  three  sites  should  be  operational  in  2015.  ELI  will  be  the  first 
infrastructure identified by ESFRI to be located in new Member States. It is largely being co-
financed  by  the  EU's  structural  funds.  The  project  is  a  very  good  example  of  how  research 
infrastructures can meet the objectives not only of scientific excellence, but also of regional 
development and European cohesion. 

Focusing EU funding on Innovation Union priorities  

Horizon 2020 – the new EU instrument for research and innovation funding from 2014 - will 
bring together all European-level support for research and innovation under one umbrella. In 

23 
24 

25 

COM(2012)392final. 
SWD(2012)212, Commission Staff Working Document – Impact Assessment accompanying 
Communication (2012)392 final  
COM (2012) 401 final and COM (2012) 417 final  

EN 

12 

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line  with  the  ambition  set  out  in  the  Innovation  Union,  Horizon  2020  marks  an  important 
break from the past, with funding having a more challenged-based approach, simpler rules for 
participants, and more effective delivery of results.  

innovative  products  and  services 

A  key  feature  of  Horizon  2020's  new  approach  is  the  emphasis  given  to  innovation. 
Concretely,  this  means  more  funding  for:  testing,  prototyping,  demonstration  and  pilot  type 
activities;  business-driven  R&D,  promoting  entrepreneurship  and  risk-taking;  shaping 
demand  for 
through  standard-setting  and  public 
procurement; and encouraging innovation in non-technological areas such as design, service 
innovation  and  creativity,  new  business  models  and  social  innovation,  thereby  reflecting  a 
broad approach to innovation. There will also be a revamped approach to SMEs that includes 
a  dedicated  instrument  for  supporting  companies  that  show  a  strong  ambition  to  develop, 
grow  and  internationalise26.  Also  in  Horizon  2020,  the  Marie  Skłodowska-Curie  Actions 
(MSCA) will contribute to the Innovation Union target of one million more researchers. 

The  current  Seventh  Framework  Programme  for  Research  (FP7)  takes  on  board  Horizon's 
2020 new emphasis on innovation. The 2013 FP7 Work Programmes embrace a much larger 
part of the innovation cycle than ever before and provide the biggest ever calls for proposals, 
totalling € 8.1 billion. The aim is to better ensure that the fruits of research can be exploited, 
and to help place new products and services on the market. 

Boosting  talent  and  new  business  creation:  the  European  Institute  of  Innovation  and 
Technology  

The  European  Institute  of  Innovation  and  Technology  (EIT)  puts  the  concept  of  the 
ʻknowledge  triangleʼ  (education,  research  and  business)  into  action  through  new  types  of 
partnership  –  Knowledge  and  Innovation  Communities  (KICs).  There  are  currently  three 
KICs - on climate change, sustainable energy and the future information and communication 
society. EIT's KICs education programmes focus on entrepreneurship and innovation skills to 
give students and business innovators the knowledge and attitudes they need to turn ideas into 
business opportunities. The EIT has defined the criteria for awarding an EIT label for Masters 
courses and PhD programmes.  

Europe  is  facing  a  considerable  shortage  of  engineers  and  ICT  practitioners  with  the  right 
combination of skills. The EIT ICT Labs Master School is one of the largest joint European 
ventures in higher education trying to remedy this problem. It involves 21 KICs universities 
and  business  schools.  The  institutions  involved  are  delivering  seven  technical  majors  and  a 
fully standardised minor in Innovation and Entrepreneurship. Students will also benefit from 
a  mentoring  scheme  and  an  internship  at  one  of  the  industry  partners.  Approximately  200 
students were admitted to the 2012 programme. 

Entrepreneurial education is combined with a range of business support services and several 
innovation  schemes  to  accelerate  the  delivery  of  innovation  to  the  market  such  as  the 
InnoEnergy Highway and the Climate-KIC Market Accelerator. The impact is already being 
seen,  with  research  results  and  new  ideas  getting  to  the  market  faster  and  attracting  first 
customers.  

Thanks to a funding from the EIT Climate-KIC, Naked Energy, a design and innovation start-
up, was able to deliver a real-world pilot of their solar technology at a meaningful scale. This 
new piece of technology sparked interest and led to an agreement with Sainsbury’s, the major 
supermarket chain.  

26 

This new scheme, inspired by the SBIR scheme in the United States, is also a response to the request 
made  by  the  European  Council  in  2011  to  explore  how  best  to  meet  the  needs  of  fast-growing 
innovative companies through a market-based approach. 

EN 

13 

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"Climate-KICs role has been to identify opportunities, to match make and to open doors for 
us. It’s like ‘sheltered innovation’. Quite simply, our relationship with Climate-KIC allows us 
to  sit  at  the  table  with  the  big  players."  Christophe  Williams  Managing  Director,  Naked 
Energy 

"We  know  the  UK.  But  there  must  be  brilliant  ideas  out  there  we  don’t  know  about  and 
Climate-KIC can bring these to us. We want to get involved at the embryonic stage in order to 
help  shape  the  technology  in  a  commercially  meaningful  way."  David  Penfold  Sainsbury’s 
Supermarkets Ltd 

The  proposal  for  the  EIT's  ʻStrategic  Innovation  Agendaʼ  outlines  the  consolidation  and 
further development of the three existing KICs and the creation of six new ones: innovation 
for healthy living and active ageing; food4future; raw materials, added value manufacturing; 
smart secure societies; urban mobility. The EIT will strongly contribute to the objectives set 
out in Horizon 2020.  

3.2. 

Getting good ideas to market 

The Innovation Union aims to remove obstacles that prevent innovators from translating ideas 
into new products and services that can be sold on world markets. Europe needs to unleash its 
innovative potential by faster standard-setting, cheaper obtention of patent protection, smarter 
public  procurement  of  innovative  products  and  services,  and  better  access  to  finance  for 
innovators  and  SMEs.  The  proposals  on  these  four  innovation  drivers  were  fast-tracked 
through  the  Single  Market  Act  I  (2011).  They  should  start  bringing  a  new  impetus  to 
European innovation from 2013, as two proposals were adopted in 2012 and the other two are 
expected to be adopted in 2013.  

Financing innovation 

Europe has no shortage of innovative ideas waiting to be converted into successful business 
models.  The  first  obstacle  is  often  access  to  finance,  further  exacerbated  by  the  on-going 
crisis. Europe has experienced a 45% drop in venture capital fundraising following the crisis. 
Moreover, Business Angel investment is currently some five times greater in the US than in 
Europe27.  

In  its  2012  report,  the  Expert  Group  on  cross  border  matching  of  innovative  firms  with 
suitable  investors  recommended  to  support  venture  capital  funds  with  real  potential, 
professionalise  the  business  angel  community,  monitor  and  encourage  crowd  funding,  and 
provide  investor-readiness  training  for  innovative  entrepreneurs.  In  2013,  the  Commission 
will also present a green paper on long-term financing of the European economy. 

To  remove  obstacles  to  cross-border  investment,  two  legislative  proposals  on  ʻSocial 
Entrepreneurship  Fundsʼ  and  ʻVenture  Capital  Fundsʼ28  were  agreed  in  2012  with  official 
adoption expected in early 2013. In addition, the Commission completed its examination of 
potential tax obstacles to cross-border venture capital investment, on the basis of which it will 
consider next steps with a view to presenting solutions in 2013.  

The  Programme  for  the  Competitiveness  of  Enterprises  and  SMEs  (COSME)  and  Horizon 
2020 will jointly support an equity and a debt financial instrument from 2014 onwards. On the 
equity  side,  both  programmes  will  jointly  make  seed,  early-stage  and  growth-stage 

27 

28 

EN 

Report  of  the  Chairman  of  the  expert  group  on  the  cross  border  matching  of  innovative  firms  with 
2012; 
European 
suitable 
http://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupDetailDoc&id=6008&no=1  
COM(2011) 860 final and COM(2011) 862 final . 

Commission 

investors; 

14 

   EN 

 
                                                 
investments  in  support  of  a  seamless,  EU-wide  venture  capital  scheme.  Horizon  2020  will 
focus on the early stage, and COSME on the growth stage. On the debt side, both programmes 
will provide loans, guarantees and counter-guarantees.  

With the aim to increase lending to research- and innovation-driven SMEs, the Risk-Sharing 
Instrument (RSI) was launched as part of the RSFF in early 2012 in the form of a guarantee 
scheme to encourage banks to provide more loans to innovative SMEs and small midcaps.  

During  2012,  the  Risk-Sharing  Finance  Facility  (RSFF)  focused  additional  resources  on 
research  infrastructures,  with  a  substantial  loan  of  up  to  € 300  million  extended  to  ESO 
(European  Southern  Observatory)  to  support  the  construction  of  the  European  Extremely 
Large  Telescope  (E-ELT).  This  revolutionary  ground-based  telescope  will  have  a  39-metre 
main  mirror  and  will  be  the  largest  optical/near-infrared  telescope  in  the  world:  “Europe's 
window on the universe”.  

In 2013, the European Investment Bank will start channelling an additional € 10-15 billion to 
innovation  and  skills  via  a  new  Growth  &  Employment  facility,  thus  generating  up  to  € 65 
billion of additional investment.  

Shaping demand for innovative products and services  

Innovative companies can only be successful if there is a market for their goods and services, 
and  consumers  willing  to  buy  them.  The  new  standardisation  package,  effective  from  1 
January 2013, and the proposal for the modernisation of the EU public procurement law, are 
key milestones towards helping innovative products and services reach the market faster. As a 
result of the former, a European standard should be developed twice as fast by 2020 and the 
latter will enable public procurers to use a special procedure for buying innovative goods and 
services,  buy  jointly  with  procurers  from  other Member  States  to  share  risks  and  costs,  and 
include the innovative character in the award criteria. However, the proposals on procurement 
still need to be adopted by the European Parliament and the Council.  
Innovation  procurement29  is  slowly  picking  up  across  Europe.  In  2012,  Italy  assigned  more 
than  €300  million30  to  pre-commercial  procurement  (PCP)31.  PCP  will  be  deployed  in 
Southern Italy with the support of structural funds, as has been done in other Italian regions. 
Moreover, the higher risk related to these purchases can be covered by a special risk-sharing 
facility  established  in  cooperation  with  the  European  Investment  Bank.  Cross-border 
collaboration  is  also  developing.  The  Nordic  Ministers  of  Industry  launched  a  ʻlighthouse 
projectʼ  in  health  care  to  strengthen  the  collaboration  between  Norway,  Finland,  Sweden, 
Denmark and Iceland on innovation procurement.  

Transnational  cooperation  on  innovation  procurement  is  currently  supported  in  a  few  areas 
with  EU  research  and  innovation  funding.  In  2012,  16  projects  were  launched  to  drive 
innovation  procurement  involving  procurers  from  the  majority  of  Member  States.  The 
projects will encourage public procurers to deploy more innovative solutions in the areas of 
lighting  systems,  energy  efficient  buildings,  supercomputing  technology,  and  better  care  for 
elderly, smart transport systems, intelligent border security control, and intelligent textiles for 
fire brigades. In 2013, such EU-level support is likely to more than double, approaching €100 
million.  

Under  the  FP7  project  SILVER,  public  procurers  from  five  countries  -  UK,  Denmark, 
Sweden,  Finland  and  the  Netherlands  -  will  together  launch  the  first  cross-border  pre-

29 

30 
31 

Innovation  procurement  includes  pre-commercial  procurement  (PCP)  and  public  procurement  of 
innovative solutions (PPI).  
€170 Mio Italian national funding, combined with additional EU Structural funds and EIB support. 
PCP is a method for procuring R&D services with the purpose of developing a new product or solution.  

EN 

15 

   EN 

 
                                                 
commercial procurement call for tender in early 2013. The call will aim  at developing new 
robotics  solutions  for  assisting  elderly  people  with  physical  disabilities.  By  making  a  PCP 
call  the  consortium  anticipates  having  access  to  new  technological  solutions  which  when 
implemented in elderly care, will make it possible by 2020 to care for 10% more people using 
the same number of carers. 

Better integration of standardisation issues early in research and innovation projects is crucial 
for knowledge dissemination, interoperability between products and services, and eventually 
opening  up  new  markets.  Standardisation  deliverables  are  being  developed  within  FP7 
projects. New projects were launched in 2012 to speed the delivery of standards inspired by 
FP-funded  research  results,  for  example  for  bio-based  products,  3D  printing,  smart  textiles 
and the use of wood in construction. Further uptake is expected in 2013 with around 75 calls 
for proposals mentioning standards.  

Each  company  has  to  manage  multiple  and  dynamic  relationships  within  several  networks. 
Setting  up  bilateral  electronic  data  exchange  with  every  single  business  partner  is  very 
cumbersome, especially for non-hierarchical manufacturing networks, and delays and errors 
can easily occur. The key objective of the inTime project is to improve delivery and reliability 
in customer-supplier relationships, balancing production in the overall network. Based on the 
project  results,  a  standardisation  deliverable  was  published  in  September  2012.  The 
multilateral  communication  platform  described  in  the  deliverable  enables  participating 
companies, especially SMEs, to simplify and streamline their business relations, as only one 
channel is needed to establish communication with all business partners on the platform. 

Innovative  products  and  services  are  also  at  the  heart  of  the  Eco-Innovation  Action  Plan 
(EcoAP)  adopted  in  December  201132.  The  EcoAP  aims  to  create  growth  and  jobs  with 
products, services, and business solutions with a positive environmental impact. It comprises 
seven actions: (1) environmental policy and regulation review; (2) demonstration and market 
replication projects; (3) standards and performance targets; (4) finance and support service to 
SMEs;  (5)  new  skill  and  jobs;  (6)  international  cooperation;  and,  (7)  European  Innovation 
Partnerships33. 

Eco-innovation  market  replication  projects,  managed  by  the  Executive  Agency  for 
Competitiveness  and  Innovation,  turn  innovations  into  marketable  green  products  and 
services. Success stories include GLASSPLUS, and SATURN.34 GLASSPLUS offers a means 
to  reuse  the  glass  from  old  TV  sets.  60 000  sets  already  found  a  new  life  as  tiles.  SATURN 
recovers  non-ferrous  metals  from  municipal  waste,  with  unmatched  separation  and  purity 
rates, above, respectively, 98 and 90%. 

Capitalising on intellectual property and creativity 

Intellectual  Property  Rights  regimes  have  a  crucial  impact  on  how  new  knowledge  and 
creations  are  owned,  shared  and  used.  Therefore  they  constitute  a  key  component  of  the 
framework conditions for research and innovation.  
The  historic  agreement  on  the  unitary  patent  was  reached  in  December  201235.  This  should 
allow the first European patent with unitary effect to be granted and registered in spring 2014. 

32 
33 
34 
35 

COM(2011) 899 final. 
http://ec.europa.eu/environment/ecoap/index_en.htm  
http://www.glassplus.eu/home.aspx, http://www.saturn.rwth-aachen.de/  
Adoption  of  the  two  regulations  implementing  enhanced  cooperation  in  the  area  of  the  creation  of 
unitary patent protection http://ec.europa.eu/internal_market/indprop/patent/index_en.htm  

EN 

16 

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Member  States  will  however  need  to  swiftly  ratify  the  Unified  Patent  Court  Agreement  in 
order to comply with the 2014 Innovation Union deadline.  
Patent Translate, a machine translation service, went live in March 201236. The tool is being 
developed  by  the  European  Patent  Office  in  cooperation  with  Google.  It  already  offers 
translations  from,  and  into,  English  for  fourteen  languages,  and  will  gradually  extend 
coverage to 32 languages by 2014. Patent Translate, a service free of charge, will make the 
content  of  patents  and  patent-related  documents  published  anywhere  in  the  world  easily 
accessible for everyone.  

In  2012,  the  Commission  presented  an  analysis  of  the  major  obstacles  that  European 
companies,  especially  SMEs,  face  in  valorising  existing  patents.  It  also  outlined  some 
possible  steps  that  could  be  taken  to  breathe  new  life  into  neglected  intellectual  property37. 
The Commission also launched a strategy for promoting cultural and creative sectors, with a 
focus on their innovation potential38. 

The  European  Creative  Industries  Alliance  launched  a  policy  dialogue  and  eight  concrete 
actions on innovation vouchers, better access to finance and cluster excellence & cooperation 
for  the  further  development  of  creative  industries  and  better  use  of  all  forms  of  knowledge 
and  creativity  by  other  industries.  The  European  Design  Leadership  Board  delivered  21 
recommendations  based  on  which  the  Commission  will  implement  an  action  plan  for 
promoting the take-up and understanding of the role of design in innovation policy.  

3.3. 

European Innovation Partnerships 

The  European  Innovation  Partnership  (EIP)  approach  to  accelerate  the  development  and 
uptake of innovations for societal challenges has entered a  new phase during 2012 with the 
pilot on ʻActive and Healthy Ageingʼ (AHA) moving from planning to implementation, and 
with the approach being proposed for four more areas. 

In February the Commission endorsed the Strategic Implementation Plan (SIP) presented by 
the AHA Steering Group and set out EU level actions in support. This included an invitation 
for stakeholders to commit  in writing  to concrete actions and/or to become a reference site, 
and the setting up a marketplace for innovative ideas helping stakeholders find partners, share 
emerging initiatives and disseminate evidence. 

There was an encouraging response with 261 commitments to six specific actions submitted 
by groups of stakeholders bringing together public authorities, technology companies, health 
providers,  industry  and  non-governmental  organisations.  In  addition,  54  regions  expressed 
their interest to become a reference site, serving as illustrations of good practice and to engage 
in scaling up and replication of innovative solutions. Close to 500 partners have signed up to 
the web-based marketplace39.  

Commitments  have  come  from  all  EU  Member  States  mobilising  over  1000  regions  and 
municipalities  in  the  EU,  as  well  as  from  other  countries. Altogether  the  submissions  show 
that  over  4  million  European  citizens  could  directly  benefit  from  the  Partnership  which  is 
intended  to  have  the  critical  mass  to  bring  about  real  reform  in  the  way  we  receive  and 
provide care in Europe. The six stakeholder groups published their Action Plans in November 
2012 outlining key deliverables and outcomes for the next 2-3 years.  

36 
37 
38 
39 

http://www.epo.org/searching/free/patent-translate.html  
SWD (2012) 458 final,  
COM(2012)537 final. 
http://webgate.ec.europa.eu/eipaha  

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“The EIP on Active and Healthy Ageing is a great example of how cooperation can be put in 
practice; not just between companies but between stakeholders across the value chain. In the 
case of AHA the risk is not in the technology, as most technologies are already there. It is a 
matter of fusion of technologies (data communication, data handling, sensor networks…) in 
real-life settings, and as a result it is much more about social innovation: new ways of doing 
things  and  new  business  models.  When  people  start  doing  things  in  new  ways,  investment 
opportunities will arise. We go for these. We will invest in innovation for active and healthy 
ageing, because you at the Commission have committed yourselves to lowering the investment 
risk by creating awareness and a receptive community, and obviously because there is a huge 
market emerging for ageing related services, which is very attractive to move into." Dr. Jos B. 
Peeters, Capricorn Venture Capital  

Following the endorsement of the AHA SIP, the Commission put forward proposals for new 
EIPs drawing lessons from the pilot, such as the need for light governance and clarifying that 
EIPs do not replace formal decision making processes for funding programmes or legislation.  

In February, the Commission proposed EIPs on ʻAgricultural Productivity and Sustainabilityʼ 
and  on  ʻRaw  Materialsʼ.  In  May  it  added  a  proposal  for  an  EIP  on  'Water'  and  in  July  it 
proposed  an  EIP  on  ʻSmart  Cities  and  Communitiesʼ'.  Following  endorsements  from  the 
Council, the  ʻWaterʼ EIP delivered  its SIP in December  2012, and  expectations are that the 
ʻAgricultureʼ,  the  ʻRaw  Materialsʼ  and  ʻSmart  Cities  and  Communitiesʼ  SIPs  will  be  issued 
during 2013 so that implementation can start as early as possible. 

A  progress  evaluation  of  AHA  and  a  broader  independent  expert  evaluation  of  the  EIP 
approach are planned for 2013 to assess if there are any additional measures or amendments 
needed to improve the impacts of the current EIPs and to set the conditions for further EIPs. 

3.4.  Maximising social and territorial cohesion 

Closing innovation divide  
The country performance analysis40 and the Regional Innovation Scoreboard 201241 (Figure 
4) show that regional innovation divergences persist and risk growing with the crisis. Strong 
and innovative regions drive performance in the most innovative countries, and such drivers 
are less prevalent in other Member States. While regional innovation performance remained 
relatively  stable  over  2007-2011,  it  showed  a  much  higher  degree  of  variation  than  the 
country  level  performance.  This  regional  diversity  calls  for  a  better  tailoring  of  innovation 
policies  to  the  relative  strengths  of  individual  regions.  This  will  be  encouraged  under  the 
future  Cohesion  Policy  2014-202042.  Member  States  will  have  to  develop  research  and 
innovation  strategies for smart specialisation focused  on  a limited  number of priorities. The 
Smart  Specialisation  Platform43  is  helping  public  authorities  design  such  strategies  through 
peer-reviews, guidelines, and workshops across Europe. Currently, three EU Member States 
and  103  regions  from  19  other  Member  States  are  registered  with  the  platform.  To  help 
regions  climb  the  ʻstairway  to  excellenceʼ,  synergies  between  Horizon  2020  and  Cohesion 
funding  will  be  maximised,  twinning/teaming  between  existing  and  emerging  centres  of 
excellence  will  be  supported,  a  policy-learning  facility  set  up  and  European  Research  Area 
chairs established.  

40 
41 
42 
43 

See annex on Member State's performance accompanying the communication  
http://ec.europa.eu/enterprise/policies/innovation/files/ris-2012_en.pdf  
See http://ec.europa.eu/regional_policy/what/future/proposals_2014_2020_en.cfm  
http://s3platform.jrc.ec.europa.eu 

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18 

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Figure 5: Innovation performance by regions 

Source: Regional Innovation Scoreboard 2012 

Supporting social innovation 
Social innovation is gaining momentum in Europe. Social Innovation Europe44, a virtual hub 
for building and streamlining social innovation, attracted nearly 50000 people in its first 18 
months.  With  unemployment  soaring,  in  October  2012  the  Commission  launched  a 
competition  calling  for  new  ideas  to  help  people  move  towards  work  or  into  new  types  of 
work. In parallel, as a follow-up to the Single Market Act I, the Social Business Initiative45 is 
addressing the obstacles that hamper the development of the social enterprise sector such as 
legislation, funding and the visibility and recognition of the social added value of this sector.  

Social  innovation  and  social  policy  experimentation  in  the  fields  of  employment  and  social 
policies have continued to be supported during 2012 through PROGRESS46 and the European 
Social  Fund  (ESF).  The  future  2014-2020  programming  period  of  the  ESF,  European 
Regional  Development  Fund  (ERDF)  and  the  new  Programme  for  Social  Change  and 
Innovation (PSCI) will reinforce such support.  

Since 2011, through FP7, the EU has supported about €30 million worth research projects on 
social  innovation  and  it  is  funding  two  networks  of  incubators  to  nurture  and  scale  up 
successful  social  innovations.  Social  innovation  will  be  further  supported  under  Horizon 

44 
45 
46 

EN 

http://www.socialinnovationeurope.eu/  
COM(2011) 682 final of 25th October 2011 
The 
EU 
programme 
http://ec.europa.eu/research/infrastructures/index_en.cfm?pg=success9  

PROGRESS 

an 

is 

financial 

instrument 

19 

   EN 

 
 
 
                                                 
2020. This will be supported by the Commission’s commitment in the Single Market Act II47 
to  develop  a  methodology  to  measure  the  socio-economic  benefits  created  by  social 
enterprises. 

Finding innovative ways of financing social innovation and supporting the modernisation of 
social  protection  policies  are  part  of  the  ʻSocial  Investment  Packageʼ  presented  in  February 
2013. It focuses on increasing the sustainability and adequacy of budget and social policies: 
activating social policies and services; investing in children and youth; and streamlining EU 
governance for social policies, monitoring and communicating with citizens.  

Experience  underlines  the  importance  of  citizens  as  key  actors  of  social  innovation  and  the 
need for broad partnerships for promoting innovation in social policy mechanisms, including 
third  sector  non-profit  and  civil  society  organisations.  Innovation  in  the  corporate  social 
responsibility area (CSR) contributes to a holistic, future-oriented approach to public-private 
partnership in addressing social challenges.  

Mobilising public sector innovation 

Given the large weight of the sector and the current financial and political situation, Europe 
must  mobilise  innovation  in  its  public  sector  if  it  is  to  excel  and  remain  internationally 
competitive.  In  addition,  the  modernisation  of  public  administration  is  one  of  the  five 
priorities set out in the Commission's 2013 Annual Growth Survey. The pilot European Public 
Sector Innovation Scoreboard48 is the first EU-wide attempt to better understand and analyse 
innovation  in  the  public  sector.  The  analysis  clearly  shows  that  improved  public  services 
make it much more likely that companies will innovate and experience an increase in sales. 
Also, countries that perform well on the quality of public services tend to perform better on 
innovation  (Figure  6).  High-quality,  innovative  administrations  are  therefore  a  key  asset  for 
spurring  Europe's  innovation  performance.  Figure  6.  Government  effectiveness  and  the 
economic impact of innovation 

47 
48 

COM(2012) 573 final of 3rd October 2012 
Pilot European Public Sector Innovation Scoreboard 2013 

EN 

20 

   EN 

 
                                                 
0.85

0.75

0.65

0.55

0.45

0.35

)
1
1
0
2
-
0
1
0
2
(

n
o
i
t
a
v
o
n
n

i

f
o
t
c
a
p
m

i

i

c
m
o
n
o
c
e
f
o

x
e
d
n

I

RO

R² = 0.56
corr. = 0.79

0.25

-0.50

DE

IE

UK

FR

DK

FI

SE

BE

LU

NL

AT

IT

SI

HU

CZ

SK

CY

ES

EE

PT

MT

EL

PL

0.00

0.50

1.00

1.50

2.00

2.50

Average government effectiveness (2000-2010) 

Source: DG Research and Innovation - Economic Analysis unit (2013)
Data: EUROSTAT, World Bank (The Worldw ide Governance Indicators (WGI) project), Innovation Union Scoreboard 2013

3.5. 

Leveraging our policies externally 

Europe should maximise the excellence of its science base and spur the growth of innovative 
companies  through  active  international  cooperation  and  by  creating  the  right  conditions  to 
attract  top  talent.  The  Commission  has  therefore  set  out  a  new  strategy  for  developing 
international cooperation in research and innovation49. The strategy proposes to further focus 
cooperation  on  EU  strategic  priorities  while  maintaining  the  tradition  of  openness  to  third 
country  participation  in  EU  research.  This  includes  addressing  global  challenges,  but  also 
making Europe a more attractive location for research and innovation. At the same time, it is 
essential  that  the  innovation  dialogues  with  third  countries  take  into  account  the  need  to 
promote a level playing field for European players present in their territories and to strengthen 
legal  certainty  for  investors,  notably  on  intellectual  property  rights  -  this  is  particularly 
relevant in the framework of the up-coming negotiations of investment agreements with third 
countries such as China. 

The new strategy will be mainly implemented through Horizon 2020, as well as through joint 
initiatives  with  EU  Member  States.  A  central  element  is  the  development  of  multi-annual 
roadmaps  with  key  third  country  partners  to  enhance  and  focus  international  cooperation. 
These roadmaps will connect to the work of the Strategic Forum for International Science and 
Technology Cooperation (SFIC) to ensure consistency and complementarity between actions 
taken  by  the  EU  and  the  Member  States.  The  SFIC  is  currently  engaged  in  three  targeted 

49 

COM(2012)497 

EN 

21 

   EN 

 
 
 
 
 
 
 
 
                                                 
initiatives with India, the USA, and China, and in October 2012 agreed to launch an initiative 
on Brazil. 
The  Group  of  Senior  Officials  (GSO)50  set  out  recommendations  for  a  Framework  for 
international  cooperation  on  global  research  infrastructures.  The  report  has  been  broadly 
endorsed by the science ministers of the CARNEGIE group51.  
Nearly all Member States have taken some action to attract more talent from overseas52, but it 
is too early to judge the success of these measures. The Commission intends in 2013 to table a 
new  proposal  for  a  single  Directive  to  make  EU  migration  rules  simpler  for  certain  groups, 
including researchers, ensuring that admission schemes and rights are uniform and transparent 
across the EU.  

4. 

CONCLUSIONS AND NEXT STEPS 

The economic situation in Europe remains fragile. The short-term outlook is still precarious. 
Nevertheless, positive trends are visible and recent in-depth reforms should bear fruit in the 
medium to long term. 

Europe's  answer  to  the  uncertainty  fuelled  by  the  crisis  must  be  to  rigorously  pursue  and 
rapidly implement the Innovation Union strategy set out in 2010. Good progress has already 
been  made  in  many  areas.  Results  of  this  should  start  being  reflected  in  the  real  economy. 
Innovation  Union  will  help  create  a  climate  of  confidence  in  the  European  Union  for 
businesses and citizens. It will do so through sustained investment in research and innovation, 
further sweeping reforms to create a true European Research Area, setting better framework 
conditions for innovative businesses and better matching supply- and demand-side measures. 

However, Europe needs to do more to make the Innovation Union a reality. In light of the on-
going crisis, decreasing public confidence and the risk of an innovation divide, the EU and its 
Member States must speed up their joint efforts and deepen the Innovation Union.  

The  immediate  challenge  is  the  extent  to  which  the  Innovation  Union  will  foster  the 
emergence  of  truly  ʻspecialisedʼ  regional  innovation  profiles  embracing  the  increasing 
fragmentation of value chains and the increasing heterogeneity of required knowledge inputs. 
More attention to the role of regional innovation policy is the only viable way to compensate 
and  possibly  off-set  the  talent  brain  drain  from  Europe’s  less-favoured  regions  towards 
Europe’s research excellence hotspots53. 

To help address the reflection on new sources of growth, the Commission will, in addition to 
pursuing the implementation of the agreed Innovation Union measures, prepare next steps for 
deepening  the  Innovation  Union.  These  are  based  on  emerging  trends,  expert  advice  and 
views of stakeholders. They will focus on:  

– 

50 

51 

52 
53 

accelerating  structural  change  within  existing  sectors  and  by  diversifying  into  new 
emerging  sectors,  and  supporting  the  development  of  high-growth  innovative 
enterprises through EU policies and coordinated additional initiatives;  

The  GSO  is  composed  by  representatives  from  Brazil,  Canada,  China,  the  European  Commission, 
France, Germany, India, Italy, Japan, Mexico, Russia, South Africa, UK, and USA. Australia obtained 
the status of observer country since November 2011 
The Carnegie Group is composed of Science ministers/ advisors of the G8 + European Commission + 
Outreach  5  (Canada,  France,  Germany,  Italy,  Japan,  Russia,  UK,  US  +  Brazil,  China,  India,  Mexico, 
South Africa) 
Researchers' report 2012  
1st Position paper of the European Research Area and Innovation Board (ERIAB): "Stress-test" of the 
Innovation Union; November 2012  

EN 

22 

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– 

– 

– 

– 

– 

– 

closing the innovation divide between European regions through smart specialisation 
and synergies between Horizon 2020 and the structural funds; 

working  on  innovation-friendly  framework  conditions  for  innovative  businesses, 
including innovation clusters; 

identifying concrete ways of boosting innovation in and through the public sector; 

developing a coherent policy approach for open innovation and knowledge transfer; 

accounting for the value of intellectual property, facilitating patent valorisation and 
ensuring the sound and effective protection of know-how and confidential  business 
information in order to facilitate knowledge transfer; 

driving retail innovation as a key action of the European Retail Action Plan, helping 
smooth the path from idea to market for innovative products and services by tapping 
the potential of the retail sector with its economic weight (4.3% of EU GDP and 8.3 
% of EU employment) and direct contact with consumers; 

– 

combining new technologies and services with innovation in business models. 

To bring about real change, Europe has to step up its commitment to deliver innovation-
based  growth.  Innovation  Union  objectives  should  drive  the  future  agenda  for  European 
integration. No country alone can deliver an innovative EU economy. It is time for European 
institutions, Member States, regions and all stakeholders to pitch in.  

EN 

23 

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ANNEX  

Annex: 2012 progress on 34 commitments set out in the Innovation Union flagship initiative 
COM (2010) 546 final 

In  green  =  commitments  that  are  on  track  and  for  which  initiatives  are  on-going  and 
progressing well; 

In orange = commitments with delayed/partially implemented measures; 

In red = comitments for which no initiatives have been taken up. 

More information on each commitment available at: http://i3s.ec.europa.eu/home.html  

Innovation Union commitment 

Deadline 

Progress 

1 

2 

3 

4 

5 

6 

7 

8 

Put in place national strategies to train enough researchers  

Test the feasibility of independent university ranking 

Create business-academia "Knowledge Alliances" 

Propose an integrated framework for e-skills  

Propose an ERA framework and supporting measures 

2011 

2011 

2011 

2012  

Construct the priority European Research Infrastructures 

2015 – 60% 

Simplify  and  focus  future  EU  research  and  innovation  programmes  on  the 
Innovation Union 

2011  

Ensure stronger involvement of SMEs in future EU R&I programmes 

Strengthen the science base for policy making through the JRC;  

Set up a Forum on Forward-Looking Activities 

9 

Set out the EIT strategic agenda 

Mid 2011 

10  Put in place EU-level financial instruments to attract private finance 

11  Ensure the cross border operation of venture capital funds; taxation 

12  Strengthen the cross border matching of innovative firms with investors 

13  Review the State Aid Framework for R&D&I 

14  Deliver the EU Patent 

15  Screen the regulatory framework in key areas 

16  Speed up and modernise standard-setting 

2014 

2012 

2011 

2014  

Start in 2011  

Early 2011 

17 

Set aside dedicated national procurement budgets for innovation 

Start in 2011 

Set up an EU-level support mechanism and facilitate joint procurement 

EN 

24 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18  Present an eco-innovation action plan 

19 

Set up a European Design Leadership Board 

Early 2011  

2011 

Establish a European Creative Industries Alliance 

20  Promote open access; support smart research information services 

21  Facilitate collaborative research and knowledge transfer 

22  Develop a European knowledge market for patents and licensing 

2011 

23  Safeguard against the use of IPRs for anti-competitive purposes 

24/ 

Improve the use of Structural Funds for research and innovation 

Start in 2010 

25 

Platform 
2012 

by 

26  Launch  a  Social  Innovation  pilot;  promote  social  innovation  in  the 

European Social Fund 

27 

Support a research programme on public sector and social innovation 

Start in 2011 

Pilot a European Public Sector Innovation Scoreboard 

28  Consult social partners on interaction between the knowledge economy and 

market 

29  Pilot and present proposals for European Innovation Partnerships 

2011 

30  Put in place integrated policies to attract global talent 

2012 

31  Propose  common  EU/MS  priorities  and  approaches 

for  scientific 

2012  

cooperation with third countries 

32  Roll-out global research infrastructures 

2012  

33  Self-assess national research and innovation systems and identify challenges 

and reforms;  

34 

Develop an innovation headline indicator 

Monitor progress using the Innovation Union Scoreboard 

EN 

25 

   EN