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Innovation is vital to European competitiveness in the global economy. The EU is implementing policies and programmes that support the development of innovation to increase investment in research and development, and to better convert research into improved goods, services, or processes for the market.

The importance of innovation

As highlighted by EU Industrial Policy, industry is crucial for EU competitiveness and innovation is a key factor in this regard. 

Industry accounts for 80% of Europe's exports. Some 65% of private sector research and development (R&D) investment comes from manufacturing.

Therefore, industrial modernisation in Europe must be broad-reaching and include:

  • the successful commercialisation of product and service innovations;
  • the industrial exploitation of innovative manufacturing technologies;
  • innovative business models.

Studies show that those companies who prioritise innovation are also those who experience the highest increase in turnover (Innobarometer, 2014):

  • Some 79% of companies that introduced at least one innovation since 2011 experienced an increase of their turnover by more than 25% by 2014.

Small and medium-sized enterprises (SMEs) are a particular target for innovation policy. The smaller the company is, the more it faces constraints to innovation or to the commercialisation of its innovations.

  • Some 63% of companies with between 1 and 9 employees declared having introduced at least one innovation since 2011, compared to 85% of companies with 500 employees or more.
  • Some 71% of companies with between 1 and 9 employees encountered difficulties commercialising their innovations due to a lack of financial resources, compared to 48% of companies with 500 employees or more.

How the Commission promotes innovation

New growth opportunities come from providing new products and services from:

  • technological breakthroughs;
  • new processes and business models;
  • non-technological innovation and innovation in the services sector.

These must be combined with creativity, flair and talent, or innovation in its broadest sense.

The latest Policy Communication (June 2014) sets out the European Commission’s priorities for innovation. In this context, Directorate General for Internal Market, Industry, Entrepreneurship and SMEs:

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