COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS A New European Innovation Agenda
Date: 2022-07-05
Institutions: Directorate-General for Research and Innovation, European Commission
Subjects: EU investment, EU strategy, digital transformation, distribution of EU funding, green economy, innovation, new technology, public procurement, research and development

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 5.7.2022  COM(2022) 332 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS A New European Innovation Agenda {SWD(2022) 187 final}  
 
 
1. LEADING THE NEW WAVE OF DEEP TECH INNOVATION  

Innovation is essential to drive Europe’s competitiveness and to ensure the health and well-being 
of its citizens. Innovation shapes markets, transforms economies, stimulates step changes in the 
quality of public services and is indispensable to achieve the overarching objectives of the twin 
green and digital transition. 

A new wave of innovation is on its way: deep tech innovation, which is rooted in cutting edge 
science,  technology  and  engineering,  often  combining  advances  in  the  physical,  biological  and 
digital  spheres  and  with  the  potential  to  deliver  transformative  solutions  in  the  face  of  global 
challenges.  The  deep  tech  innovations  that  are  emerging  from  a  growing  cohort  of  innovative 
startups in the EU have the potential to drive innovation across the economy  and society. This 
can in  turn transform  the EU’s business  landscape and  associated markets and help  addressing 
the most pressing societal challenges, including by achieving the UN Sustainable Development 
Goals.   

Europe has a long and proud history in innovation and is optimally positioned to lead this wave 
of deep tech innovation for four underlying reasons. 

First,  the  EU’s  leadership  in  science.  The  EU  is  a  powerhouse  in  knowledge  production,  and 
deep  tech  innovation  exploits  new  science  and  technology  insights  based  on  the  highest 
standards of ethics and integrity. With 6% of the world population, the EU is responsible for one 
fifth of all top-quality publications1 in the world2. Moreover, EU companies are global leaders on 
high-value green patents and green patents in energy intensive industries. 

Second,  Europe’s  strong  industrial  base  and  increasingly  vibrant  startup  ecosystem.  Deep  tech 
innovation  results  in  physical  products  rather  than  pure  software  services3  and  therefore  often 
benefits  from  strong  partnerships  with  leading  industries.  The  partnerships  fostered  between 
companies  and  with  researchers  through  EU  programmes  alongside  policies  such  as  the  New 
Industrial  Strategy4  and  associated  initiatives  such  as  the  European  Chips  Act5,  enable  the 
development of strong EU propositions and value chains in deep tech enabled sectors. 

Third, ambitious framework conditions conducive to innovation in the single market. Deep tech 
innovation  targets  solutions  to  key  societal  challenges.  As  evidenced  by  the  EU’s  position  in 
wind  energy6  for  example,  bold  policy  choices,  such  as  on  climate  change  and  environmental 
protection,  coupled  with  close  cooperation  between  the  public  and  private  sector  and  the 
strengths  of the single market  have created the conditions  for European companies to  thrive in 
deep tech enabled sectors of the future.  

1 Defined as the top 10% most cited publications 
2 Science, Research and Innovation Performance of the EU (SRIP) report 2022. 
3 83% of deep tech ventures are engaged in building a physical product (Source: Boston Consulting Group). 
4 https://ec.europa.eu/info/strategy/priorities-2019-2024/europe-fit-digital-age/european-industrial-strategy_en  
5 https://digital-strategy.ec.europa.eu/en/policies/european-chips-act  
6 Half of active companies are headquartered in the EU, and European Original Equipment Manufacturers (OEMs) also hold a 
globally leading position COM(2021) 952 final, October 2021 

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Finally, Europe’s talent base. Deep tech startups and innovation need access to a strong supply of 
Science,  Technology,  Engineering  and  Mathematics  (STEM)  and  entrepreneurial  skills,  and 
associated capabilities that adhere to the highest research and development values and principles. 
Europe has  some of the best  higher education institutions (HEIs) and research organisations in 
the  world  and  their  vital  contribution  to  the  EU’s  education,  research  and  innovation  agenda 
continues  to  be  strengthened  through  initiatives  such  as  the  new  European  strategy  for 
universities7. With 17.5 million individuals in tertiary education, over a million researchers, and 
increased  licensing, patenting and startup  creation activity in  many countries,  these institutions 
are already playing a critical role in ensuring the flow of skilled individuals and ideas for deep 
tech innovation. 

To leverage these strengths,  the EU  will  take forward concrete  new measures. These  measures 
will enable innovators including deep tech startups to take better advantage of the single market 
and  attract  new  institutional  investors  to  strengthen  financial  and  capital  markets  to 
commercialise  and  scale  deep  tech  companies  here  in  the  EU.  The  new  measures  will  help 
individuals  become  better  equipped  with  relevant  skills,  to  enable  the  potential  of  our  diverse 
population, especially women, to be realised and to attract talented individuals to come and work 
in  the  EU.  The  proposals  on  regulatory  frameworks  will  help  the  EU  keep  pace  with  rapid 
technology  development  to  enable  deep  tech  innovations  to  be  tested  and  subsequently 
commercialised in the EU.  

The uptake of deep tech innovation and the ability of regions across the EU to contribute to, and 
benefit  from  innovations  will  also  be  strengthened  through  actions  to  address  the  persistent 
innovation  divide  across  Member  States  and  regions.  This  will  enhance  internal  cohesion,  and 
deliver wider economic and social benefits - at present, the highest performing regions are up to 
nine  times  more  innovative  than  the  lowest  performing  ones8  and  technological  output  as 
measured by patents is concentrated in regions hosting the headquarters of large companies and 
with a high share of manufacturing companies9. 

Recent global trends also necessitate prompt action and underline the need to mitigate strategic 
dependencies in key technologies and critical raw materials. In keeping with the ambitions of the 
recent REPowerEU Plan10 that builds on the Fit for 55 proposals, the EU must wean itself from 
its  dependence  on  Russian  fossil  fuels  well  before  2030  by  boosting  energy  efficiency  gains, 
including through the uptake of circular economy principles, and accelerate the development and 
deployment  of  clean  energy  technologies  notably  from  renewable  sources  including  renewable 
hydrogen. 

Prompted by considerations for a more circular, digitalised and resource efficient economy, the 
pandemic, or Russia’s aggression against Ukraine, companies will need to build new capabilities 
and seek trusted partners  to  build supply chain  resilience, develop  new trade opportunities and 
collaboration  given  the  increasingly  international  nature  of  innovation.  Horizon  Europe, 
Erasmus+ and other EU programmes and policies have consistently supported such cooperation 

7 Commission Communication on a European strategy for universities   
8 European Commission, (2022), The Eighth Report on Economic, Social and Territorial Cohesion based on Regional Innovation 
Scoreboard 2021. 
9 Staff Working Document accompanying the New European Innovation Agenda, section 2.3.1 Innovation Divide. 
10 REPowerEU Plan COM(2022) 230 final. 

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with  trusted  partners,  including  through  Association  agreements.  The  Communication  on  the 
global approach to research and innovation11 provides an improved framework to develop such 
cooperation.  Further,  the  new  EU  global  connectivity  strategy,  the  Global  Gateway12,  and  the 
Communication on the trade policy review13 underline the importance of deepening international 
partnerships,  diversifying  trade  relations  and  leveraging  the  openness  and  the  attractiveness  of 
the EU’s single market.  

The measures in this Communication, grouped under five flagship areas, can work in concert to 
leverage the strengths of the single market, strong industrial and talent base, stable institutions, 
and  democratic  societies  to  drive  deep  tech  innovation  in  the  EU,  deliver  on  the  opportunities 
offered  by  the  twin  transition  and  build  lasting  global  partnerships  while  meeting  the  need  for 
future open strategic autonomy. The measures build on past and ongoing initiatives, to improve 
the  EU’s  innovation  performance  alongside  the  objectives  and  priorities  of  the  new  European 
Research  Area14  (ERA),  the  European  Education  Area  (EEA)15,  the  European  strategy  for 
universities, the Digital Education Action Plan16, and the Digital Decade goals17 and associated 
targets of 20 million ICT specialists by 2030. The goal of this Communication was also shared 
by the Conference on the Future of Europe in its final report of May 2022, calling for “Ensuring 
greater  participation  of  startups  and  SMEs  in  innovation  projects  as  this  increases  their 
innovative  strength,  competitiveness  and  networking18.  The  Communication  also  provides  an 
overview of the EU’s innovation performance, examined in greater detail in the accompanying 
staff working document.  

2. EUROPEAN PERSPECTIVES – CHALLENGES AND FLAGSHIPS 

2.1. Access to finance for deep tech scale-ups 

2.1.1. Challenges  

Europe is amongst the fastest growing regions in private capital investment19. Between 2016 and 
2020, it experienced a faster growth than China and the US20, albeit from a lower base. European 
startups also accounted for 33% of all capital invested globally in rounds of up to USD 5 million 
compared to 35% for the US21.  

11https://ec.europa.eu/info/sites/default/files/research_and_innovation/strategy_on_research_and_innovation/documents/ec_rtd_c
om2021-252.pdf  
12 JOIN(2021) 30 final 
13 Communication on the Trade Policy Review (europa.eu) 
14 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020DC0628&from=EN  
15 https://education.ec.europa.eu/    
16 https://education.ec.europa.eu/focus-topics/digital-education/digital-education-action-plan  
17 Europe’s Digital Decade: digital targets for 2030 | European Commission (europa.eu) 
18 https://ec.europa.eu/info/strategy/priorities-2019-2024/new-push-european-democracy/conference-future-europe_en#final-
reports-and-proposals: measures 5 and 6 in the proposal “Sustainable Growth and innovation”, measures 7,8 and 19 in the 
proposal “Enhancing EU’s competitiveness and further deepening the Single Market”, and the proposal “Digital innovation to 
strengthen the social and sustainable economy”. 
19 Data from Invest Europe, 2022. 
20 A Compound Annual Growth Rate (CAGR) of 49%, against the 34% for China and 28% for the US. 
21 The State of Tech in Europe 2021. 

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Establishing  the  European  Innovation  Council  (EIC),  allows  the  most  promising  deep  tech 
startups in Europe to gain additional support to scale-up their breakthrough innovations through 
a unique combination of public grant and patient equity investment through the EIC Fund.  The 
Fund is set to become the largest early stage, deep tech investor in Europe: leveraging a budget 
of EUR 10 billion for the EIC to crowd in EUR 30 to 50 billion22 from other private investors. 

Measures  under  the  capital  markets  union  (CMU)23  and  support  through  InvestEU24,  the  latter 
mobilising more than EUR 370 billion in additional investments, will further incentivise private 
investment to support such innovations in Europe. This includes efforts to leverage a fraction of 
the  ca.  EUR  13  trillion  of  “assets  under  management”  (AUM)25  of  EU-based  long-term 
institutional  /  private  investors  such  as  pension  funds  and  insurance  companies,  into  scale-up 
venture capital funds in the EU. 

Nonetheless, the EU has a significantly lower number of tech scale-ups than the US and China, 
and  scale-up  financing  lags  behind  that  for  startups26.  A  number  of  factors  hold  the  EU  back. 
Traditional bank products, such as loans, credit lines and bank overdrafts continue to be the main 
source of external finance for European enterprises27. Alternative market-based resources such as 
equity  play  a  relatively  minor  role  in  the  EU,  and  the  tax  system  reinforces  the  status  quo,  as 
interest payments on debt financing are tax deductible, while in most Member States, the costs 
related to external equity financing are not28.  

The  short-term  character  of  traditional  financing  together  with  the  comparative  fiscal 
disadvantage of equity compared with debt is a significant constraint on innovation investments 
notably when scaling up. Deep tech innovation requires large amounts of patient capital as the 
companies concerned generally: lack established revenue streams and secured cash flow; are rich 
in intellectual property (IP) but have little tangible collateral; and will take time to deploy their 
results in terms of both marketable products and financial returns.  

The  EU  also  lacks  large  venture  capital  (VC)  funds  who  are  willing  to  subscribe  large  deal 
values  when  compared  to  those  in  the  US  and  China.  The  distribution  of  VC  investors  across 
different  investor  types  reveals  that  pension  funds  and  insurance  companies  account  for  only 
12.7% of the total VC funds raised in the EU in 202029. Government agencies on the other hand, 
accounted  for the largest share (almost  35%). This  underscores the  fragmented and risk averse 
nature  of  the  European  VC  market,  with  many  investors  focusing  on  early  stage,  narrow, 
regional markets, which result in fewer and smaller late-stage investment rounds in Europe.  

22 https://eic.ec.europa.eu/system/files/2021-03/ec_rtd_eic-vision-roadmap-impact.pdf  
23 Capital markets union 
24 https://investeu.europa.eu/index_en  
25 EU-27 pension funds represent ca. EUR 3 trillion (OECD, global pension statistics, 2022) and EU-based insurance companies 
have ca. EUR 10 trillion of assets under management (AUM; Insurance Europe, data, 2021). 
26 Tackling the Scale-up Gap: Evidence and impact of the scale-up financing gap for innovative firms in Europe and reflections 
on potential solutions - Anita Quas, Colin Mason, Ramón Compañó, James Gavigan and Giuseppina Testa. 
27 European Commission (2017), Analysis of European Corporate Bonds Market. Analytical report supporting the main report 
from the Commission Expert Group on Corporate Bonds. 
28 DEBRA Inception impact assessment  
29 Science, Research and Innovation Performance of the EU 2022 (forthcoming) based on Invest Europe, 2021. 

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A  majority  of  the  larger  investment  rounds  have  been  driven  by  overseas  investors  (non-EU 
based  VC  funds)30,  while  Initial  Public  Offering  (IPOs)  also  play  a  relatively  minor  role  in 
financing  in  the  EU  when  compared  to  the  US.  An  undersized  IPO  market  limits  sources  of 
equity  funding  for  companies31  and  investment  opportunities  for  investors.  This  also  limits  the 
exit routes  for  VC and private  equity investors which may have invested  at an earlier stage  of 
development  of  the  company.  In  2020,  only  5%  of  the  total  divestment  amount  took  place 
through  IPOs  in  the  EU,  against  the  30%  reported  in  the  US32.  There  is  evidence  that  in 
combination,  these  factors  have  pushed  European  companies  towards  relocation  including 
through overseas listings and exits including trade sales33. 

Furthermore, women and those from diverse backgrounds remain underrepresented in both deep 
tech startups and in investment funds despite clear correlations between company growth and the 
presence  of  diverse  teams34,  including  women,  in  leadership  positions.  In  2020,  technology 
companies with  female-only founders captured just  1.7% of the capital  raised in  European VC 
markets35, and the difference between male-led companies and those with mixed and/or female 
founders remained significant in terms of both capital raised and the number of deals. Evidence 
points to similar under representation with respect to other minority groups. This limits the flow 
of ideas  and talents  that cater to  the needs of the EU’s diverse population  and opportunities in 
global markets.  

2.1.2 Flagship on funding for deep tech scale-ups  

This  flagship  focuses  on  measures  that  will  accelerate  the  growth  of  deep-tech  start-ups  in  the 
EU. Approximately EUR 45 billion of funding for scale-ups could be mobilised by 202536 from 
untapped  sources  of  private  capital,  and  the  cost  of  listing  on  public  markets  could  also  be 
reduced. 

Rebalancing debt-equity incentives 

The  Commission  has  proposed  a  debt-equity  bias  reduction  allowance  (DEBRA)  on 
corporate income tax37 that would increase the availability of equity and make it more attractive 
for companies by reducing the cost of new equity across the EU. Once adopted by the Council, 
this  could  provide  an  allowance  on  the  cost  of  raising  equity  combined  with  a  limitation  of 
interest deductibility. All non-financial corporations would be eligible for an allowance on new 

30 75% of the scale-up finance deals in the EU. 
31 IPOs allow scale-ups to access risk capital to an amount of capital 5.5 times superior to that raised by those that remain private 
(https://mindthebridge.com/tech-scaleup-ipos-2019-report/) 
32 Science, Research and Innovation Performance of the EU 2022 based on Ambrosio et al (2021). 
33 Braun et al. (2019), Follow the Money: How Venture Capital Facilitates Emigration of Firms and Entrepreneurs in Europe 
2019. 
34 https://hbr.org/2018/07/the-other-diversity-dividend/  
35 Atomico (2021), State of European Tech 2021. 
36 EUR 30 billion from pension funds, EUR 15 billion from insurance companies. Staff Working Document accompanying the 
New European Innovation Agenda, 2.1.3. Funds that could be mobilised through the action on later stage venture capital 
financing. 
37 Published on 11 May 2022. 

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equity and small and medium-sized enterprises (SMEs) could receive a higher notional interest 
rate (i.e., benefit from higher deductions) compared to larger firms.  

Listing 

In line with the objectives of the Commission’s 2020 capital markets union (CMU) Action Plan, 
the Commission will propose a Listings Act in the second half of 2022. The Listings Act will 
simplify and ease both initial and ongoing listing requirements for certain types of companies in 
order  to  reduce  costs  and  increase  legal  certainty  for  issuers,  while  safeguarding  investor 
protection  and  market  integrity.  To  allow  certain  founders  and  families  (e.g.  issuers  listing  on 
SME growth markets) to retain control post-listing, while raising a larger amount of funds and 
enjoying  the  benefits  associated  to  listing,  the  Listing  Act  may  also  propose  a  minimum 
harmonisation  of  national  legal  regimes  relating  to  Dual  Class  Share  structures  across  the  EU. 
Further,  thanks  to  an  EU  guarantee  under  the  SME  IPO  initiative38  of  InvestEU,  the  European 
Investment Fund will invest in SMEs that are going public or intend to do so. This will attract 
additional private investments to support SME scale-up and growth. 

Later stage venture capital financing 

The InvestEU Guarantee Agreement signed by the European Commission and the EIB Group in 
March 2022  paves  the way to  implement  the  InvestEU financial products  under the Research, 
Innovation and Digitisation window through which the EIB Group will deploy EUR 5.5 billion 
to support breakthrough innovations up to 202739. Building on a successful pilot40, the European 
Scale-Up  Action  for  Risk  Capital  (ESCALAR)  mechanism  will  be  expanded  under 
InvestEU. The expansion will attract more and new private funds and institutional investors in 
particular,  by  complementing  VC  equity  with  quasi-equity  having  a  reduced  risk  profile.  This 
has  the  potential  to  double  a  given  VC  fund’s  investment  capacity  without  distorting  the 
character of the European VC landscape by attracting additional private investment based on a 
non pari-passu approach41.  

In support of this, the Commission will convene leaders of large institutional investors (pension, 
insurance and sovereign wealth funds) to explore opportunities and requirements for increasing 
investments  into  VC  funds.  Efforts  to  help  financial  institutions  and  their  investment  experts 
better assess, value and valorise intangible assets to facilitate the use of IP as collateral by SMEs 
will also be explored under InvestEU. 

Further,  together  with  Member  States  and  the  EIB,  the  Commission  will  assess  the 
complementarities  between  existing  EU  funding  instruments  and  recent  initiatives  such  as  the 
European Tech Champions Initiative42 (ETCI, to which the EIB Group will initially commit up to 
EUR  500  million),  with  a  view  to  addressing  the  scale-up  gap  for  European  deep-tech 
companies. 

38 https://www.eif.org/InvestEU/equity_products_calls/index.htm 
39 https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1548  
40 https://www.eif.org/what_we_do/equity/escalar/index.htm  
41 Investments benefitting from certain additional protections that reduce investment risk compared to other share classes or 
similar. In recognition of the lower risk, the investment will not benefit from the same return entitlements as other investors 
subscribing other share classes or similar with higher risk.  
42 https://www.eif.org/what_we_do/equity/news/2022/eib-supports-the-pan-european-scale-up-initiative-to-promote-tech-
champions.htm  

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Increasing Diversity and Improving Deal Flow 

The Commission will pilot an innovation gender and diversity index. This will include data 
on  women  and  other  less  represented  groups,  including  individuals  with  disabilities,  in 
innovative  startups  and  scale-ups  as  well  as  amongst  investors  and  funds  investing  in  such 
companies. It will be informed by a study to assess the gender investment gap both at the level of 
female-led companies and female-led funds. The study will develop a harmonised methodology 
for  robust  and  systematic  data  collection  and  suggest  adequate  data  analytics,  to  better  inform 
policy. Programmes such as the EIT’s Women2Invest43, will further support efforts to increase 
diversity by helping investors connect to, and recruit from a more diverse pool of talent.  

2.2 Framework conditions for deep tech innovation 

2.2.1. Challenges  

Framework conditions including regulations can drive or thwart the development and uptake of 
innovative new products and processes.  

The EU has taken steps to strengthen integration within the single market and adopt regulations 
that balance the need to protect with that to innovate, as evidenced by the Commission’s better 
regulation  guidelines  and  associated  toolbox44.  Experimentation  clauses  paving  the  way  for  a 
more dynamic evolution of regulations exist in the digital45 sphere, and the European Blockchain 
Services  Infrastructure  (EBSI)  funded  by  the  Digital  Europe  programme  is  one  such  example 
providing a general-purpose pan-European platform for cross-border public services. The recent 
evaluation of the European Interoperability Framework46 also found that establishing structured 
cooperation around the interoperability of digital public services could have a material impact on 
innovation in the public sector. The transport and energy sectors have also benefited from such 
approaches in some Member States.  

More  recently,  the  Commission’s  revised  proposal  on  the  Renewable  Energy  Directive47 
provided  scope  to  create  regulatory  sandboxes  to  foster  innovation  in  the  renewable  energy 
sector,  and  a  recommendation  on  fast  permitting  the  deployment  of  renewable  energy  projects 
was included  as  part of  the REPowerEU  Plan. The  proposal  for a  revised  Industrial  Emissions 
Directive (IED)48 also promotes the uptake of innovative technologies and techniques during the 
ongoing  industrial  transformation  by  among  others  providing  for  temporary  derogations  on 
emission limits to test emerging techniques or to implement a state-of the art technique. Further, 
living labs for green digital solutions and smart zero pollution under the Zero Pollution Action 

43 https://eit.europa.eu/our-activities/opportunities/eit-opens-call-investors-participate-women2invest  
44 Better regulation: guidelines and toolbox | European Commission (europa.eu) - see in particular the dedicated tool #22 on 
research and innovation and tool #69 on emerging policies such as regulatory sandboxes. 
45 https://eur-lex.europa.eu/resource.html?uri=cellar:e0649735-a372-11eb-9585-01aa75ed71a1.0001.02/DOC_1&format=PDF  
46 https://ec.europa.eu/isa2/eif_en/  
47 https://ec.europa.eu/info/sites/default/files/amendment-renewable-energy-directive-2030-climate-target-with-annexes_en.pdf  
48 https://ec.europa.eu/environment/industry/stationary/ied/evaluation.htm  

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Plan49  will  support  engagement  with  regional  and  local  authorities  alongside  stakeholders  to 
develop local actions for green and digital transition. 

The nature of breakthrough deep tech innovations and the urgency of the twin transition however, 
call  for  more  progress  on  responsible  regulatory  frameworks  that  facilitate  experimentation  by 
innovators,  ensure  public  acceptance  and  enable  learning  and  adaptation  by  regulators  in  new 
domains. There is also considerable scope to learn from distinct approaches taken forward across 
EU  Member  States  to  clarify  options  at  the  disposal  of  innovators  and  regulators,  to  facilitate 
such experimentation.  

Further,  leveraging  the  role  of  the  public  sector  as  a  lead  customer  can  shape  markets,  deliver 
improved  and  accessible  services,  crowd  in  private  investment  where  it  would  otherwise  be 
lacking,  and  importantly,  provide  innovative  start-ups  with  a  vital  first  customer.  In  the  EU, 
public  authorities  spend  around  14%  of  GDP  (around  EUR  2  trillion  a  year)  on  procuring 
products and services50. According to EU wide benchmarking51, modernising public services and 
strengthening the EU’s industrial competitiveness globally requires a doubling of investments in 
innovation  procurement.  To  date,  while  81%  of  OECD  countries  have  developed  national 
strategies  with  policies  that  foster  innovation  procurement,  only  a  third  of  EU  Member  States 
have  such  strategies.  Data  that  can  help  improve  existing  approaches  is  either  missing  or 
inconsistent, impeding informed decision-making.  

2.2.2 Flagship on enabling deep tech innovation through experimentation spaces and public 
procurement 

This  flagship  focuses  on  facilitating  innovation  through  improved  framework  conditions 
including  experimental  approaches  to  regulation,  through  so-called  regulatory  sandboxes52,  as 
well as test beds, living labs and innovation procurement. 

Regulatory sandboxes 

The  Commission  will  issue  a  guidance  document  in  the  first  half  of  2023  that  will  clarify 
relevant  use  cases  of  regulatory  sandboxes,  test  beds  and  living  labs  in  order  to  support 
policymakers  and  innovators  in  their  approach  to  experimentation  in  the  EU.  A  staff  working 
document will provide an overview of the main existing experimentation clauses and regulatory 
sandboxes in EU law, and support will be provided for innovators to identify areas and establish 
an  experimentation  space,  such  as  regulatory  sandboxes,  living  labs  or  test  beds,  which  could 
facilitate the deployment of disruptive technologies through future calls53.  

49 Zero pollution action plan (europa.eu) 
50  European  Council  of  the  European  Union  (2020),  Council  Conclusions:  Public  Investment  through  Public  Procurement: 
Sustainable Recovery and Reboosting of a Resilient EU Economy. 
51 See Commission notice on innovation procurement C(2018)3051, based on the Bell innovation curve for conservative sectors. 
52  Regulatory  sandboxes  provide  well-defined  exemptions  to  allow  trials  of  innovative  products  and  technologies  that  would 
otherwise not be fully compliant with existing regulations. 
53  https://ec.europa.eu/info/research-and-innovation/funding/funding-opportunities/funding-programmes-and-open-calls/horizon-
europe/european-innovation-ecosystems_en  

8 

 
 
 
                                                           
The  Commission  will  also  support  the  creation  of  the  GovTech  Incubator  in  2023:  an 
agreement  for cross-border collaboration between  digitalisation  agencies for the deployment of 
innovative digital government solutions through Digital Europe programme.  

In addition, the Commission will pilot an Innovation-Friendly Regulations Advisory Group, a 
group  that  provides  upstream  policy  advice  on  new  technologies  in  relation  to  the  regulatory 
environment  and  business  models,  to  focus  on  the  use  of  advanced  digital  technologies  within 
public services. This will include, in particular, the implementation of selected use cases in the 
public  sector  and  interoperability  requirements  for  digital  solutions  adopted  by  public 
administrations  in  the  EU.  Advice  from  the  group  may  also  support  actions  and  programmes 
related to public procurement and experimentation with advanced emerging digital technologies 
by public authorities in controlled environments (regulatory sandboxes). 

Test beds 

The  Commission  will  establish  a  new  open  innovation  test  bed  in  renewable  hydrogen  in 
2023 under Horizon Europe to provide access to physical facilities, capabilities and services. As 
part of the open innovation test bed, the implementing parties will seek guidance on compliance 
with the European legal and regulatory frameworks and on increasing circularity by design (life 
cycle assessment), to support the development of a vibrant hydrogen economy across the entire 
value chain.  Insights from the 22 open innovation test beds supporting the industrial  uptake of 
technological innovations in the areas of nanotechnology and advanced materials will inform the 
future  applicability  of  this  approach.  This  will  be  complemented  with  advice  from  high-level 
groups  such  as  a  "New  Mobility  Tech  Group”  on  facilitating  testing  and  trials  of  emerging 
mobility technologies and solutions in the EU (European mobility test bed)54. 

Access to innovation infrastructure 

The  revised  State  Aid  Framework  for  Research  and  Development  and  Innovation  (RDI)  will 
include, upon adoption, a new rule allowing Member States to grant aid for the construction 
and  upgrade  of  testing  and  experimentation  infrastructures.  This  will  ensure  that  the  RDI 
framework  together  with  the  General  Block  Exemption  Regulation  (GBER)  can  help  Member 
States support the delivery of the  European  Green Deal55 and  the Commission’s  Industrial and 
Digital56 strategies. 

The Commission will also launch testing and experimentation facilities57 for AI innovation at 
a  European  level  in  2023. These  will  allow  innovators  to  test  state-of-the  art  solutions  and 
products in real-world environments and at scale. 

Innovation procurement 

The Commission will support the formation of an innovation procurement specialist advisory 
service. This will act as an intermediary between public procurers and innovative suppliers. The 
Commission will also support the creation of living labs and incubators for example, to connect 

54 See Sustainable and Smart Mobility Strategy. 
55 A European Green Deal | European Commission (europa.eu) 
56 Europe’s Digital Decade: digital targets for 2030 | European Commission (europa.eu) 
57 Digital Europe Programme 

9 

 
 
                                                           
innovators  and  public  administrators  to  provide  innovative  solutions  in  areas  of  public  need58. 
Further, the Commission will update its EU wide benchmarking59 of national policy frameworks 
and  investments  on  innovation  procurement  in  Europe  and  assess  take  up  of  the  innovation 
partnership  procedure  within  the  procurement  directive  of  2014  alongside  that  on  pre-
commercial  procurements,  which  fall  outside  of  the  procurement  directives  and  international 
procurement agreements.  

2.3. Promoting innovation ecosystems and tackling the innovation divide across the EU  

2.3.1 Challenges 

The  EU’s  innovation  performance  continued  to  improve  over  the  period  2014-202160.  It  can 
compete  effectively  with  leading  economies  across  the  globe  by  building  a  true  pan-European 
innovation  ecosystem  underpinned  by  thriving  regional  innovation  ecosystems  and  capitalising 
on the experience, needs, vision and perceptions of an increasingly diverse range of individuals, 
companies and places.  

Smart  specialisation  strategies61  play  a  central  role  in  strengthening  regional  innovation 
ecosystems  so  that  they  are  better  equipped  to  stimulate  and  sustain  economic  growth.  They 
provide the framework for European Regional Development Fund (ERDF) support for research 
and innovation to the tune of an estimated EUR 56 billion  for the 2021-2027 period. Thematic 
Smart  Specialisation  Platforms  and  partnerships  have  also  become  key  tools  for  connecting 
innovators  with  similar  or  complementary  strengths  and  priorities  in  all  Member  States  and 
regions, including in technology areas that are key for the twin green and digital transition. Over 
the last six years, 37 interregional partnerships62 involving 180 territories from 33 EU and non-
EU  countries  have  provided  such  support  in  areas  such  as  advanced  battery  materials,  and 
hydrogen and fuel cell technology.  

Research and technology infrastructures are also helping attract the best researchers, engineers, 
technicians,  and  students  and  have  the  capacity  to  underpin  regional  and  regional  innovation 
ecosystems.  In  regions  across  Europe,  the  alignment  of  support  from  the  ERDF  with  smart 
specialisation  strategies  is  fostering  place-based  innovation  and  stimulates  investments  aligned 
with  regional  business  needs  and  opportunities.  This  has  led  to  the  creation  of  regional 
innovation hubs and industrial clusters based on the co-location of research infrastructures, HEIs, 
research  and  technology  organisations,  and  industry  (e.g.,  Grenoble,  Hamburg  or  Brno).  The 

58 The Single Market Programme | European Commission (europa.eu) 
59  European  Commission,  Directorate-General  for  Communications  Networks,  Content  and  Technology,  The  strategic  use  of 
public  procurement  for  innovation  in  the  digital  economy:  executive  summary  in  English,  French  and  German,  Publications 
Office, 2021. 
60 European Innovation Scoreboard 2021. 
61  Smart  specialisation  strategies  are  the  EU’s  principal  methodology  for  reinforcing  national  and  regional  innovation  eco-
systems. Member States and regions across the EU are presently updating their smart specialisation strategies, in line with the 
established concept and relevant legal provisions for cohesion policy support. 
62 https://ec.europa.eu/growth/industry/strategy/interregional-
partnerships_en#:~:text=Interregional%20partnerships%20The%20European%20Commission%20supports%20interregional%20
partnerships,interregional%20cooperation%20to%20boost%20industrial%20competitiveness%20and%20innovation  

10 

 
 
 
                                                           
European  Cluster  Collaboration  Platform  (ECCP)63  provides  both  an  overview  of  the 
specialisation and the impact of such clusters across 201 European regions, and EU programmes 
including  the  work  of  the  Enterprise  Europe  Network  (EEN)  facilitate  critical  connections  to 
international  partners  and  supply  chains  reflecting  the  importance  of  openness  and  trade 
partnerships for the EU’s economy64. The Commission has also launched the Common Mapping 
of Innovation Supporting Actors initiative65 to provide a comprehensive mapping of innovation 
supporting  actors  and  state  of  the  art  supporting  facilities  across  all  regional  innovation 
ecosystems throughout Europe. 

This  work  is  in  addition  to  funding  for  the  European  Institute  of  Innovation  and  Technology 
(EIT)  and  the  European  Innovation  Ecosystems  (EIE)  under  Horizon  Europe's  Pillar  III 
"Innovative Europe", which is laying the groundwork for a pan-European Innovation Ecosystem 
intertwining  regional  innovation  ecosystems  across  the  EU.  The  EIT's  Regional  Innovation 
Scheme  (RIS)  focuses  on  developing  innovation  ecosystems  in  low-innovation  performance 
regions across Europe and in linking these ecosystems to local and regional smart specialisation 
strategies.  A  new  set  of  EIE  projects  will  complement  this  by  connecting  well-developed 
regional innovation ecosystems with less developed ecosystems, ensuring cross-fertilisation.  

Moreover,  the  Commission  continues  to  encourage  more  coherence  and  greater  synergies 
between  EU  policies  and  funding  mechanisms  supporting  business  innovation  at  all  levels 
including  by  Member  States  under  the  New  ERA  Policy  Agenda.  This  includes  the  industrial 
technology roadmaps that look to align research and innovation investments at EU and national 
levels to foster the development and uptake of innovative technologies66 and the ERA hubs. The 
Recovery  and  Resilience  Facility  (RRF)  will  further  underpin  such  developments.  EUR  44 
billion  (at  2021  prices)67  will  be  provided  in  the  form  of  loans  and  grants  to  address  country-
specific  challenges  identified  in  the  European  Semester  and  promote  the  green  and  digital 
transition, which will contribute to system-wide resilience.  

New  models  of  collaboration  have  also  been  enabled,  including  through  the  Industrial 
Alliances68  that  bring  together  a  wide  range  of  partners  in  a  given  industry  or  value  chain, 
including  stakeholders  from  the  public  and  private  sector,  and  Important  Projects  of  Common 
European  Interest  (IPCEI)69,  which  enable  the  commercialisation  of  breakthrough  innovations 
integrating the efforts of several EU Member States in support of the EU’s industrial strategy in 
areas  such  as  renewable  and  low  carbon  hydrogen  and  microelectronics.  Furthermore,  the 
network of European Digital Innovation Hubs will support digital innovation in SMEs and public 
administrations  across  all  regions  of  the  EU,  by  complementing  national  and  regional 
digitalisation strategies, in order to help companies innovate and become more competitive using 
digital technologies. 

63 https://clustercollaboration.eu/  
64 https://trade.ec.europa.eu/doclib/docs/2021/february/tradoc_159438.pdf  
65 https://joinup.ec.europa.eu/collection/cmisa  
66https://ec.europa.eu/info/research-and-innovation/research-area/industrial-research-and-innovation/era-common-industrial-
technologies-roadmaps_en  
67 More than EUR 44 billion of the total will support research and innovation activities.  
68 Industrial alliances (europa.eu) 
69 https://ec.europa.eu/commission/presscorner/detail/en/IP_21_6245  

11 

 
 
                                                           
Despite  these  efforts,  regional  disparities  in  research  and  innovation  performance  remain  deep 
across the EU and this innovation divide has been increasing. The diffusion of innovations and 
the uptake of breakthrough technologies including through inter-regional linkages remains sub-
optimal and there is also unexploited potential in regional innovation ecosystems, often centred 
around higher education, research or training organisations. These can contribute70 to industrial 
sectors and global value chains, but may currently lack incentives, experience and the resources 
to engage more actively especially in less developed regions. 

This  gap  in  innovation  performance,  mirrored  by  downturns  in  economic  growth,  connectivity 
and  income,  alongside  rising  inequality,  weakens  the  performance  of  the  EU  innovation 
ecosystem as a whole and hinders cohesion across the EU.  

2.3.2  Flagship  on  accelerating  and  strengthening  innovation  in  European  Innovation 
Ecosystems across the EU and addressing the innovation divide 

This flagship aims to accelerate innovation and unlock excellence across the EU through various 
tools. It focuses on creating the basis for the emergence of connected regional innovation valleys 
across the EU,  notably  involving  regions  with  a lower innovation  performance, by building on 
strategic areas of regional strength and specialisation, in support of key EU priorities.  

Fostering connected regional deep-tech innovation valleys across the EU  

This  action  will  look  to  strengthen  innovation  ecosystems  across  the  EU,  by  accelerating  the 
development and deployment of innovation, including  deep tech innovation.  It brings together 
less and more innovative regions with a view to addressing the most burning challenges facing 
the EU, namely reducing the reliance on fossil fuels, increasing  global food security, mastering 
the  digital  transformation  (including  cybersecurity),  improving  healthcare  and  achieving 
circularity.  

It will be launched by the end of 2023 and identify up to 100 regions committed to enhance the 
coordination  and  directionality  of  their  R&I  investment  and  policies,  at  regional  level.  It  is 
expected that these regions will prioritise 3-4 inter- regional innovation projects including in 
deep  tech  innovation,  linked  to  key  EU  priorities.    It  will  build  on    Smart  Specialisation 
Strategies  and,  where  applicable,  on  the  participation  in  the  Partnerships  for  Regional 
Innovation (PRIs)71, a pilot involving 74 EU territories (including 63 regions - NUTS2) that was 
launched  by  the  European  Commission  and  the  European  Committee  of  the  Regions  in  April 
2022.  

In  order  to  capitalise  on  such  investments  and  maximise  their  impact,  the  Commission  will 
support  efforts  to  turn  the  diversity  of  the  EU’s  territories  into  a  strength  by  leveraging  the 
specific assets of each region, and facilitating collaboration to build new EU value chains. This 
will enable regions with aligned areas of specialisation and complementary capabilities, as well 
as  different  levels  of  innovation  performance,  to  collaborate  and  take  forward  joint  innovation 
projects targeting EU priorities.  

70 As illustrated in the HESS handbook (JRC125293) 
71 https://s3platform.jrc.ec.europa.eu/pri  

12 

 
 
 
                                                           
With  funding  of  EUR  100  million  from  Horizon  Europe  and  EUR  70  million  from  the 
Interregional Innovation Investments (I3) instrument under the ERDF, support will be provided 
for  interregional  collaboration  activities  that  feature  collaboration  between  at  least  one  less 
innovative and another more innovative region. Supported actions could include  market uptake 
of research, support companies in scaling up their ideas, as well as deploying and demonstrating 
deep  technologies  in  real  world  environments  and  with  end  users,  access  to  cross  border 
infrastructure  and  expertise,  exchange  of  staff,  training  and  skills  development  and  developing 
standards and regulations through sandboxes and test beds. Successful applicants under the joint 
Horizon and Interregional Innovation Investment Instrument (I3) calls will also be recognised as 
a “regional innovation valley”. 

It  is  expected  that  regional  innovation  valleys  will  tap  into  the  support  available  through  their 
national  and  regional  ERDF  programmes  to  maximise  their  contribution  to,  and  benefit  from, 
engagement  in  interregional  activities.  It  is  estimated  that  at  least  EUR  10  billion  available  to 
Member  States  under  Smart  Specialisation  Strategies  will  be  directed  to  regional  innovation, 
including in deep-tech innovation, linked to EU priorities.  

This  action  will  take  account  of  existing  efforts  aimed  at  reinforcing  and  connecting  industrial 
and regional innovation ecosystems. This includes I3 under Cohesion Policy; Startup Villages72 
as part of the Long term Vision for Rural Areas policy73; Euroclusters74 under the Single Market 
Programme;  and  Horizon  Europe  including  European  Innovation  Ecosystems,  Startup  Europe, 
Widening Participation and Strengthening the European Research Area, Missions, and the work 
of the EIT’s Knowledge and Innovation Communities (KICs) and RIS. 

Synergies between cohesion policy programmes and Horizon Europe 

To  achieve  the  ambition  of  building  greater  synergies  between  cohesion  policy  and  Horizon 
Europe during the course of the 2021-2027 programming period, the Commission will publish a 
guidance document75 outlining complementarities between the respective funding instruments. 
This  will  support  managing  authorities  of  the  cohesion  policy  programmes,  National  Contact 
Points for Horizon Europe and project promoters in making better use of opportunities to foster 
innovation in all regions, through the integrated use of these key EU instruments to facilitate the 
deployment  and  uptake  of  advanced  technologies  funded  through  research  and  innovation 
programmes,  and  thereby  increase  their  impact.  Such  synergies  will  also  be  sought  elsewhere 
including  through  the  EU  ETS  Innovation  Fund76,  which  will  support  the  demonstration  of 
innovative low-carbon technologies and support the transition to climate neutrality. 

Domain specific ecosystems 

As  part  of  the  REPowerEU  Plan,  the  European  Commission  has  committed  to  boosting 
breakthrough innovation in renewable and low carbon hydrogen, a key technology for breaking 

72 https://s3platform.jrc.ec.europa.eu/en/w/the-european-startup-village-forum-call-for-pledges  
73 https://ec.europa.eu/info/strategy/priorities-2019-2024/new-push-european-democracy/long-term-vision-rural-
areas_en#documents 
74 https://clustercollaboration.eu/tags/joint-cluster-
initiatives#:~:text=To%20implement%20the%E2%80%AFupdated%20EU%20Industrial%20Strategy%2C%20the%20European,
the%20transition%20to%20a%20green%20and%20digital%20economy  
75 Commission notice of synergies between Horizon Europe and ERDF programmes (2022) 
76 Innovation Fund (europa.eu) 

13 

 
 
                                                           
the  reliance  on  fossil  fuels.  Drawing  on  a  EUR  200  million  top-up  from  Horizon  Europe,  the 
number of Hydrogen Valleys in the EU will, starting in the fourth quarter of 2022, be doubled to 
reach 50 by 2025. These will cover several hydrogen applications and combine into an integrated 
regional  ecosystem  covering  the  entire  value  chain,  aligned  to  regional  requirements.  The 
existing  hydrogen  valleys  established  in  the  EU  will  also  be  connected  with  one  another  to 
accelerate  the  rollout  of  the  hydrogen  economy  in  the  EU,  with  funding  under  the  Connecting 
Europe Facility.   

Further,  through  the  proposed  EU  Chips  Act,  action  will  be  taken  to  bolster  Europe’s 
competitiveness  and  resilience  in  semiconductor  technologies  and  applications.  This  will  help 
support  the  twin  digital  and  green  transition  and  strengthen  Europe’s  technological  leadership, 
and  therefore  ambitions  for  open  strategic  autonomy  in  the  field.  Investments  in  the  next 
generation of technologies will include support for Europe wide access to design tools and pilot 
lines  for  prototyping,  testing  and  experimentation.  In  total,  more  than  EUR  43  billion  of 
investment  will support the  policy  ambitions  of the  Chips  Act  in the period up to 2030, which 
will be broadly matched by long-term private investment. 

Important Projects of Common European Interest 

The  Commission  will  continue  to  actively  support  Member  States  collaboration  in  taking 
forward  cross-border  Important  Projects  of  Common  European  Interest  (IPCEI)  under  the 
State  Aid  Framework,  to  enable  investment  at  scale  in  support  of  breakthrough  innovations  in 
key sectors and overcome market failures across the EU, including in less developed regions.  

To date, two IPCEIs in the battery value chain have enabled significant investment in research 
and  innovation  as  well  as  in  support  of  the  first  industrial  deployments  of  new  battery 
technologies77. Over EUR 6 billion of Member States’ funding will unlock an additional EUR 14 
billion in private investments. A second IPCEI in microelectronics78 will also be taken forward 
building on the success of the first79, and the Commission will actively support ongoing efforts 
by  Member  States  in  the  design  of  IPCEIs  in  the  areas  of  health,  cloud  infrastructure  and 
services, and hydrogen technologies and systems, with a view to completing the assessment of 
the first IPCEI on renewable and low carbon hydrogen by summer 2022. Further, as part of the 
RePowerEU Plan, the Commission will support efforts by the Member States to pool resources 
focused on breakthrough technologies and innovation along the solar and wind energy and heat 
pumps value chains. 

Innospace 

The  Commission  will  establish  ‘Innospace’,  an  AI-based  open  platform,  to  support  the 
circulation of ideas and access to research results, highlight the demand and supply of innovative 
solutions,  and  connect  stakeholders  to  facilitate  collaboration.  It  will  provide  all  stakeholders 
with  information  on  innovation  challenges  and  opportunities  (technology  and  market  trends, 
intellectual property, demand, etc.) and facilitate the identification of functionalities, services and 
funding  opportunities,  public  or  private,  to  support  the  translation  of  ideas  into  activities  and 
projects. 

77 IPCEI Batteries (ipcei-batteries.eu)  
78 IPCEI on microelectronics – A major step for a more resilient EU chips supply chain | European Commission (europa.eu) 
79 https://www.ipcei-me.eu/  

14 

 
 
                                                           
Further, a new ‘EIC ScaleUp 100’ action80 will identify a cohort of a hundred deep tech start-
ups with the potential to scale up as global leaders or potential unicorns81 from the portfolio of 
the  EIC  as  well  as  other  EU  programmes.  By  mid-2023  these  companies  will  start  receiving 
enhanced support to develop their strategy and leadership team, protect IP, connect to strategic 
investors  and  partners,  expand  internationally  and  obtain  links  to  national  scale  up  support. 
Besides direct support to companies, the initiative will also share best practice amongst Member 
States and across Europe-wide networks 

2.4 Deep tech talents 

2.4.1 Challenges 

Innovation depends on the successful nurture, attraction and retention of talented individuals and 
a diverse array of skills. High quality education and attractive working conditions are thus key to 
attracting  and  ensuring  a  flow  of  highly  skilled  and  talented  individuals  that  can  contribute  to 
achieving wider policy priorities including the twin transition and a competitive edge in strategic 
value chains.  

To  date,  the  Bologna82  and  Lisbon83  processes  have  played  a  key  role  in  improving  European 
competitiveness in higher education, boosting both cooperation and mobility within Europe and 
in  incentivising  global  talent  to  move  to  Europe.  Proposals  under  ERA,  European  Education 
Area (EEA), the Skills Agenda84, the European strategy for universities, and the Skills and Talent 
package85  alongside  EU  programmes  such  as  European  Social  Fund  Plus,  Marie  Skłodowska 
Curie Actions (MSCA), Erasmus+ and Erasmus for Young Entrepreneurs also play a significant 
role in developing, attracting and retaining skills. 

The  new  European  strategy  for  universities  features  measures  to  turn  HEIs  into  engines  of 
regional innovation, including through a talent fair to match students and startups, a programme 
to  support  the  creation  of  incubators  in  European  HEIs,  and  a  new  ‘innovators  at  school’ 
initiative.  Likewise,  in  recognition  of  the  importance  of  vocation  education  and  training,  the 
centres of vocational excellence (CoVE)86 provide high quality support for innovation across the 
EU  and  within  regions  including  through  services  such  as  clusters  and  business  incubators  for 
startups alongside entrepreneurial initiatives for participants. 

The  EIT  has  created  the  largest  network  of  innovation  partners  with  2900  partners  with  a 
particular focus on education courses that combine technical and entrepreneurship skills, as well 
as startup creation and acceleration services with the provision of equity investment for startups. 
he  Structured  Dialogue  on  digital  education  and  skills  launched  in  October  2021,  following 
President  von  der  Leyen  State  of  the  Union  address,  will  also  support  Member  States  in  their 

80 EIC Work Programme 2022 – p. 113.  
81 A company with a valuation of over EUR 1 billion. 
82 http://www.ehea.info/  
83 https://www.coe.int/en/web/higher-education-and-research/lisbon-recognition-convention  
84  European Skills Agenda - Employment, Social Affairs & Inclusion - European Commission (europa.eu) 
85  Skills and Talent | European Commission (europa.eu) 
86 https://ec.europa.eu/social/main.jsp?catId=1501 

15 

 
 
 
                                                           
efforts to attain the Digital Decade target for skills. It will contribute identifying existing gaps at 
national level and promote successful approaches to improve digital skills and related training. 

Furthermore,  several  Member  States  have  also  now  launched  ‘startup  visas’  and  in  2021,  26 
countries (24  EU Member States alongside  Iceland) signed the Declaration on the EU Start-up 
Nations  Standard87,  which  promotes  policies  that  will  favour  startups,  and  facilitate  access  to 
talent, including international talent. 

Nonetheless,  the  EU  appears  to  be  losing  the  global  race  for  talent88.  Skilled  researchers  and 
potential  academics  have  moved  from  the  EU  to  the  US,  and  the  EU  has  been  less  successful 
than other OECD  countries such  as the US,  Canada  and Australia in  attracting  global talent  at 
earlier  career  stages  including  at  PhD  level.  Access  to  talents  is  also  hampered  by  structural 
barriers and persisting biases, resulting in a lack of diversity in particular STEM fields: women 
represent  22.4%  among  doctoral  graduates  in  the  field  of  ICT  and  29.4%  in  the  field  of 
Engineering Manufacturing and Construction. 

In  parallel,  the  EU's  working  age  population  is  shrinking  due  to  demographic  change,  and 
foreseeable  changes  to  the  labour  market  point  to  the  likelihood  of  growing  skills  mismatches 
and future shortages. There is for example a relatively high share of professionals with skills in 
advanced manufacturing technologies and industrial biotechnology in the EU27, but a noticeable 
gap when compared to the US in AI and cybersecurity89. 

High  concentrations  of  talents  within  EU  Member  States  will  accentuate  these  shortages.  The 
HEInnovate  country  reports90  show  that  the  most  innovative  and  entrepreneurial  HEIs  are 
concentrated in the main cities with a resultant disparity between the needs of the economy and 
the availability of talent. Regions with the potential to develop technologies critical to the green 
transition  such  as  renewables  are  often  distant  from  those  with  transitioning  industries  such  as 
coal mining91.  

University-industry collaboration alongside that with research and technology infrastructures is a 
crucial  channel  for  the  production,  valorisation  and  diffusion  of  new  knowledge.  Evidence 
however  points  to  mixed  uptake  in  support  of  inter-sectoral  mobility  despite  increased 
recognition of its value.  Higher education, research and technology infrastructures and training 
institutions, in less innovative regions in particular, currently lack the incentives, experience and 
resources  necessary  to  engage  more  effectively  with  regional  and  international  partners  in 
industry. Entrepreneurial networks and training, essential for building capacity and experience in 
identifying  opportunities,  and  commercialising  innovative  propositions  are  also  not  equally 
accessible, and the EU’s innovation ecosystem fails to reflect the rich diversity of its population. 

87 https://startupnationsstandard.eu/  
88 Khan, J. (2021). European academic brain drain: A meta‐synthesis. European Journal of Education, 56(2), 265-278;   
89 Advanced Technologies for Industry – Final Report, report on technology trends and technology adoption, July 2021  
90 HeInnovate: Encouraging entrepreneurship through higher education – OECD  
91 https://joint-research-centre.ec.europa.eu/jrc-news/eu-coal-peat-and-oil-shale-regions-updated-analysis-challenges-ahead-2021-
03-16_en  

16 

 
 
                                                           
Further, despite an effective stock options92 regime for startups to attract talent proving its value, 
levels of employee ownership remains low across the EU93. The absence of innovation friendly 
employee ownership regimes hampers the ability of EU startups to compete for talent with Big 
Tech companies. 

2.4.2 Flagship on fostering, attracting and retaining deep tech talents 

Given  the  sizeable  challenge  to  attract  and  retain  talents  in  the  EU,  this  flagship  focuses  on 
enhancing  EU  efforts  through  activities  that  will ensure  the  development  and  flow  of  essential 
deep tech talent within and to the EU. 

Deep tech talents 

The EIT will take forward an initiative to target 1 million deep tech talents over a 3-year period 
across  all  Member  States.  The  EIT  will  update  and  scale  up  its  talent  and  skills  development 
programmes  based  on  the  needs  of  deep  tech  fields  ranging  from  new  materials  and  synthetic 
biology  to  cleantech.  Scale-up  companies  alongside  other  industry  representatives  will  inform 
curricula  and  ensure  that  they  accommodate  changing  labour  market  needs  in  respective 
technology areas.  

The EIC and the EIT will also launch an innovation intern scheme in the third quarter of 2023, 
to create opportunities for over 600 researchers and EIT labeled students and graduates to gain 
an innovation experience by 2024. The interns will gain work experience in successful EIC and 
EIT supported companies, with  researcher and  associated  company needs informing individual 
internships.  

The  Commission  will  also  provide  additional  training  support  to  HEIs,  including  European 
Universities  Alliances,  businesses  and  research  and  innovation  centres  through  the  Digital 
Europe programme. This will include the training of specialists in fields such as data science, AI, 
cybersecurity  and  quantum  to  support  the  future  deployment  of  such  technologies  across  all 
economic sectors.  

Furthermore,  the  Commission,  in  partnership  with  interested  Member  States  and  stakeholders, 
will  design  an  EU  Talent  Pool  for  launch  by  mid-202394.  It  will  be  an  EU-wide  platform,  a 
matching tool to help European businesses, including startups, to find the talents that they are not 
able  to  find  in  the  EU  labour  market.  This  will  increase  the  mobility  of  skilled  individuals 
towards  and  within  Europe  through  international  recruitment  and  by  supporting  matchmaking 
between EU-based employers and qualified nationals of non-EU countries wishing to work and 
move legally to the EU. The Students and Researchers Directive95 and the revised EU Blue Card 
Directive96, the latter to be transposed by 18 November 2023, will also offer legal pathways to 

92 Estonia, Latvia, Lithuania, France, Portugal, Italy, Poland, Sweden and Ireland have already implemented policies to promote 
the use of stock options also for startups.   (source: Rewarding Talent - A guide to stock options for European entrepreneurs, 
Index Venture 2021) 
93 In 2016, it was approximately half of that in the US. Despite increases since, it remains relatively low. 
94 Part of the policy package on “Skills and Talent” adopted by the Commission in April 2022. 
95 Directive (EU) 2016/801. 
96 Directive (EU) 2021/1883, with deadline for transposition on 18/11/2023, repealing Council Directive 2009/50/EC. 

17 

 
 
 
                                                           
attract high-skilled workers, researchers and students from non-EU countries and facilitate their 
mobility within the EU. Further, in keeping with the Skills and Talent proposal, the Commission 
will relaunch discussions with Member States and other relevant stakeholders to assess the scope 
for  further  EU  level  action  targeting  the  admission  of  entrepreneurs  and  startup  founders  from 
third countries.  

Stock options 

The  Commission  will  establish  a  working  group  on  stock  options under  the  EIC  Forum  to 
explore  approaches  to  tackle  the  administrative  barriers  that  currently  limit  the  uptake  of 
employees’  stock  options  across  the  EU.  The  forum  will  in  the  first  instance  allow  the 
Commission and Member States to exchange information and share best practice with a view to 
facilitating a coordinated approach across the EU. 

Women leading deep-tech innovation 

A women entrepreneurship and  leadership scheme will support early-stage women-led tech 
startups  including  through  an  enhanced  ‘WomenTech  EU’  call97.  This  will  feed  into  other  EU 
initiatives  such  as  ‘Women4Cyber’98,  and  potentially  national,  acceleration  programmes,  to 
speed  up  the  growth  of  women-led  companies.  Collaboration  between  the  EIC  and  EIT  to 
support  female  entrepreneurs  will  be  reinforced,  by  opening  the  EIC’s  Women  Leadership 
Programme  to  women-led  deep-tech  startups  from  the  EIT.  Complementary  activities  will 
include  opportunities  to  network  and  connect  female  beneficiaries  from  a  range  of  initiatives; 
equipping  girls  and  women  with  entrepreneurship  and  digital  competencies  through  targeted 
actions  like  Entrepreneurship,  Science,  Technology,  Engineering,  Arts  and  Mathematics 
(ESTEAM) Fests alongside mentor, training and support schemes99; and support for the creation 
and development of social start-ups led by women by making the best use of actions included in 
the European social economy action plan100. 

Promoting an Entrepreneurial and Innovation Culture 

The Commission will establish a peer learning and review for innovative policy and practice 
community.    In  cooperation  with  the  OECD,  it will  gather  HEIs,  including  the  new  European 
network of innovative HEIs, public officials and key stakeholders to spur the adoption of policies 
and practices that strengthen HEIs’ contribution to innovation in the communities they serve. An 
annual Education and Innovation Summit will reinforce such efforts by bringing together HEIs, 
deep  tech  companies  and  entrepreneurs  to  foster  cooperation  and  inspire  the  wider  education, 
research  and  innovation  community  to  promote  an  entrepreneurial  and  innovation  culture  in 
Europe.  

97 https://eic.ec.europa.eu/news/eu-launches-women-techeu-pilot-put-women-forefront-deep-tech-2021-07-13_en  
98 Commission launches Women4Cyber, a registry of talents in the field of cybersecurity | Shaping Europe’s digital future 
(europa.eu) 
99 Organised in 19 EU Member States to boost women and girls’ competences including through ESTEAM online communities 
allowing learning and connecting with their peers online. 
100 Social Economy Action Plan - Employment, Social Affairs & Inclusion - European Commission (europa.eu) 

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The  Commission  will  also  continue  to  support  young  entrepreneurs  through  the  EIT  “girls  go 
circular project”101 , and extend it to cover participants from all EU Member States equipping 
over 40 000 school girls with digital and entrepreneurial skills. 

Furthermore,  from  2023,  the  Erasmus+  Alliances  for  Innovation102  will  support  the 
development of entrepreneurial skills with a particular focus on deep tech skills. This will 
support and complement the development of incubators within  HEIs, in close cooperation with 
the  entrepreneurial  sector,  to  help  student  entrepreneurs  turn  their  ideas  into  businesses,  as 
announced in the European strategy for universities.  

The Commission will also  support the creation of communities of expert facilitators, including 
the  European  Universities  Alliances,  to  increase  collaboration  between  industry,  academia  and 
research  organisations,  and  to  help  match  the  supply  of  knowledge  with  the  requirements  of 
industry for innovation 

2.5. Improving the innovation policy-making framework 

2.5.1 Challenges 

Impactful innovation policies must be based on accurate monitoring and evaluation. Policies at 
both EU and national level must keep pace with the changing nature of innovation.  

At present, the innovation policy-making landscape is varied with multiple definitions in relation 
to  key  terminology  and  often  policy  related  data  that  is  difficult  to  compare.  This  makes  it 
difficult  for  decision  makers  at  EU  and  national  level  to  have  a  commonly  shared  view  of  the 
state of play of innovation and of the different components and trends of innovation in the EU. 
This  flagship  aims  to  tackle  these  policy  framing  challenges,  as  well  as  to  enhance  capacity 
support for Member States in need to improve their policy-making approach. 

2.5.2 Flagship on improving policy making tools 

This flagship focuses on the development and use of robust, comparable data sets and a common 
data  taxonomy  that  can  inform  policies  at  all  levels  across  the  EU,  and  policy  support  for 
Member States. 

Data informed policy 

The Commission will prepare an exploratory report on definitions related to startups, scale-
ups  and  deep  tech  innovation  during  the  first  quarter  of  2023.  A  subsequent  pilot  study  will 
establish a set of indicators on startups, scale-ups and deep tech innovation that can help analyse 
and model innovation ecosystem policies at regional, national and European level. The European 
Innovation Scoreboard will be updated accordingly.  

101 Girls Go Circular | Digital and Entrepreneurial Skills for the Circular Economy (eit-girlsgocircular.eu) 
102 The Erasmus+ Innovation Alliances foster Europe’s innovation capacity through cooperation and flow of knowledge among 
higher education, vocational education and training (both initial and continuous), and the broader socio-economic environment. 

19 

 
 
 
 
                                                           
Support for Member States  

The  Commission  will  support  Member  States  and  regions  in  designing  and  implementing 
better innovation policies through the Technical Support Instrument  (TSI) as part of Next 
Generation EU103. This will provide essential support that can for example cover data gathering 
for informed policy making, capacity building for public procurement personnel, the provision of 
regulatory advice and the use of regulatory sandboxes.  

The  Commission  will  also  reinforce  its  Horizon  policy  support  facility  to  provide  practical 
support  to  design,  implement  and  evaluate  reforms  that  enhance  the  quality  of  research  and 
innovation investments, policies and systems in Member States. 

Coordinating policy 

The  Commission  will  strengthen  the  role  of  the  European  Innovation  Council  Forum104  in 
2022,  enhancing  the  exchange  of  best  practices  and  coordination  of  national  innovation  policy 
initiatives. The policy orientations of the Forum will be consistent with the Pact for Research and 
Innovation105,  and  will  feed  into  the  work  of  the  ERA  governance  and  the  European  Research 
Area  and  Innovation  Committee,  in  its  role  as  a  high-level  strategic  policy  joint  advisory 
committee,  providing  early  advice  to  the  Council,  the  Commission  and  the  Member  States  on 
strategic research and innovation policy issues. 

3. CONCLUSIONS 

Europe can be a global leader in the current wave of deep tech innovation by making a concerted 
effort  that  leverages  its  diverse  talents,  intellectual  assets  and  industrial  capabilities.  Member 
States  and  regions  in  particular  are  encouraged  to  build  on  the  proposals  and  work  with  the 
Commission and stakeholders to mobilise investments, ensure favourable framework conditions 
and implement essential reforms. 

The Commission will monitor and report on the progress and impact of the actions identified in 
this Communication by 2024, in close cooperation with the representatives of Member States in 
the European Innovation Council Forum.  

103 https://europa.eu/next-generation-eu/index_en  
104 https://ec.europa.eu/research-and-innovation/en/strategy/support-policy-making/shaping-eu-research-and-innovation-
policy/building-european-innovation-ecosystem/eic-forum  
105 Proposal for a Council Recommendation on a Pact for Research and Innovation in Europe (2021) 

20 

 
 
 
 
 
 
                                                           
List of Actions in the Communication 

Title (Flagship – Actions) 

Timeframe 

Flagship: Funding for deep tech scale-ups 

1.  Directive on debt-equity bias reduction allowance (DEBRA) on corporate income tax, 

Q2 2022 

Commission proposal 

2.  Listings Act, Commission proposal  
3.  Expansion of the European Scale-Up Action for Risk Capital (ESCALAR) mechanism  2023 
4.  EIC WP 2022 Pilot European innovation gender and diversity index   
5.  EIT Women2Invest Programme 

Q1 2023 
Q4 2022 

Q4 2022 

Flagship: Enabling deep tech innovation through experimentation spaces and public procurement 

6.  Guidance document on Regulatory Sandboxes  

7.  Open innovation test bed in renewable Hydrogen 

8.  Launch Testing and Experimentation Facilities for testing AI innovation 
9.  Revised State Aid Framework for Research and Development and Innovation 
10.  Launch  Innovation Procurement Specialist Advisory Service 

Q2 2023 

Q1 2024 

2023 
Q4 2022  
Q1 2024 

Flagship: Accelerating and strengthening innovation in European Innovation Ecosystems across the EU 
and addressing the innovation divide 

11.  Establish and connect regional deep tech innovation valleys  

Q3 2023 

12.  Commission notice of synergies between Horizon Europe and European Regional 

Q3 2022 

Development Fund programme 

13.  Double the number of Hydrogen Valleys in the EU 
14.  Establish Innospace – one stop shop for innovation ecosystems’ players 
15.  Launch Scaleup 100 

2025 
2023 
Q1 2023 

Flagship: Fostering, attracting and retaining deep tech talents 

16.  Launch EIT deep tech talent initiative  
Q4 2022 
17.  Launch innovation intern scheme 
Q3 2023  
18.  Launch an EU Talent Pool to help businesses, including startups, find non-EU talents   Q3 2023 
19.  Establish Women Entrepreneurship and Leadership scheme 
Q2 2023  
20.  Best practice exchange on startup employees’ stock options 
Q4 2022 
21.  Education and Innovation practice community  
Q4 2022 
22.  Launch Erasmus+ Alliances for Innovation  
Q2 2023  
23.  Launch Digital Europe call to train experts in future-oriented fields  
Q3 2022 

Flagship: Improving policy making tools 

24.  Report on definitions related to startups, scale-ups and deep tech innovation 
25.  Strengthen the role of the European Innovation Council Forum 

Q1 2023 
Q4 2022 

21