- level disparity, with the lack of intangibles investment particularly acute in some countries. increasing the resources devoted to r & d would improve the ability of euro area firms to absorb more innovation. economic dynamism the third main factor increasing absorptive capacity is the framework in which the business operates. greater economic dynamism, from competition to higher rates of business entry, plays an important role in incentivising firms to adopt new technology. 13 ensuring that failed firms are able to smoothly exit the market is also key to enabling capital and labour to be allocated to where it can be more productively used. business churn – the combined rate of business formation and closure – has been declining in europe and the united states since just before the crisis ( chart 4 ). in lock step with the decline in churn, evidence suggests that capital misallocation has been rising in both regions. 14 6 / 9 bis central bankers'speeches as an example of barriers to business creation, it takes on average about 10 days to start a new business in the euro area. depending on the country it can take between four days and almost a month. yet in the global best performer – new zealand – it is possible to set up a business in less than a day. there are barriers as well to the orderly exit of firms. resolving insolvency takes an average of almost two years in the euro area, three times longer than in the best three performing countries. this is why we talk frequently about the need for structural reforms of regulatory and judicial processes to bolster business dynamism, as well as the need to complete the single market. this is especially true in services, where the laggard firms are noticeably behind the frontier. of course, creating the right regulatory framework and market conditions to nurture innovation and promote its transformation into new products and processes is complex, and there is no particular established winning formula. but there are a number of countries in the euro area that have proven relatively more successful at putting in place an effective “ innovation ecosystem ”. 7 / 9 bis central bankers'speeches one of the aims of this conference is to investigate international and euro area best practice and facilitate the sharing of that knowledge with countries where an effective ecosystem has yet to be established. conclusion let me conclude. there are many reasons why it is a priority today in the euro area to address weak productivity growth. but while some progress can be made in innovation, it is not in my view

area countries are in the world ’ s top ten for innovation. so if, as the world ’ s second - largest economic area, we were to dismantle barriers to innovative activity in the euro area, it would clearly give a boost to global innovation. i will not go into detail here about what policies this might entail, but clearly government support for innovation matters : in europe differences in innovative capacity between countries are closely related to public spending on r & d, particularly in basic research. 4 the second reason why i am reasonably optimistic is that there is no clear evidence yet of a 1 / 9 bis central bankers'speeches slowdown in innovation. the available data in terms of global r & d spending, and the ongoing historically high rate of high - tech patent registrations seem to challenge this perception. moreover, despite the global slowdown in aggregate productivity, firms at the global productivity frontier have continued to post strong productivity gains over the past decade. the performance of euro area businesses at the global frontier is on a par with businesses in other developed economies, particularly in manufacturing. it is the performance of firms away from the frontier that has been lagging ( charts 1 and 2 ). although this is a common feature for all oecd countries, it is particularly the case for euro area services, where productivity growth for the laggard firms has stagnated. 2 / 9 bis central bankers'speeches 3 / 9 bis central bankers'speeches diffusion it seems, therefore, that a large contributing factor to the slowdown in aggregate productivity is the second link in the chain : the lack of diffusion of innovation. this is a long - standing issue for the euro area : better adoption of ict in the united states appears to explain most of the productivity gap between the us and the eu15 from 1995 to 2007. the contribution to aggregate productivity growth from non - ict sources of capital deepening and total factor productivity ( tfp ) growth over that period was broadly equivalent in the two regions. 5 4 / 9 bis central bankers'speeches but what is now becoming clearer is where the diffusion gaps lie. recent work carried out by the ecb using micro data shows that the difference in productivity between the most productive and the least productive firms in each narrow, two - digit sector is considerable. the top 10 % of firms, in terms of productivity, are on average three times more productive than the firms in the bottom 10 % ( chart 3 ). similar differentials occur in the united states. 6