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Innovation Union: An integrated innovation strategy for growth and jobs

Peter Dröll

The Innovation Union is one of several flagship initiatives which support Europe 2020, the EU's growth strategy until the end of the decade. Peter Dröll, head of the Innovation Policy Unit at the Directorate-General for Research and Innovation, explains how SMEs can contribute significantly to achieving the objectives of this initiative by generating growth and creating jobs.

‘We need SMEs in our drive to become a more competitive, sustainable and inclusive economy. We also need SME's ingenuity to address societal challenges,’ underlines Dr Dröll. European SMEs are key players, considering their 85% contribution to total employment growth, while accounting for 67% of jobs. ‘It is impressive that SMEs create more new jobs than their actual share in the economy. They are a job-creation machine!’

Easing the path from idea to market

The Innovation Union intends to tap the full potential of SMEs through a strategic approach which integrates research and innovation instruments and actors. To reach this potential, favourable framework conditions need to be put in place. Dr Dröll discusses how patent protection, public procurement, standardisation and smart regulation measures can help to create a single European market for innovation which would attract innovative companies and businesses, as well as remove remaining barriers in bringing ideas to market.

The absence of a European patent leads to a much higher cost of patenting in Europe (20 times more expensive than in the United States), and this is especially problematic for SMEs. The European Legislator has taken action. ‘We are very close to introducing a unified patent and reducing patenting costs by 80%,’ he says. With regard to public procurement, it comprises almost 20% of the EU’s GDP, with SMEs carrying out the majority of procurements. In spite of this, very little goes to innovation. ‘If we can steer procurers to buy innovation, we would create a win-win situation for SMEs and innovation. Following a proposal from the European Commission, a change in the procurement laws is near adoption by the Parliament, which will render innovation a selection criterion, introduce an innovation procedure and simplify joint procurement across European borders.’ A new European regulation on standard setting accelerates, simplifies and modernises standardisation procedures. This allows, according to Dr Dröll, SMEs to scale up innovation. He maintains that smart regulation - a simple, understandable, effective and enforceable regulatory environment - can influence the competitiveness of SMEs and their ability to grow and create jobs.

The Innovation Union also aims to stimulate private sector investment and proposes to increase European venture capital investments which are currently at a quarter of the level in the United States. ‘The European Commission has put forward a regulatory measure for the creation of a European venture capital passport which, under certain conditions, enables a venture capital fund to invest and to draw investment from any Member State without having to go through the various national procedures,’ stresses Dr Dröll. ‘Through the financial instruments of EU research and competitiveness programmes, we give loan guarantees in equity funding to venture capital funds and allow companies access to finance. It is our intent to provide public funding to leverage private investment.’

As of 2014, Europe will have a single funding programme for research and innovation, Horizon 2020. This financial instrument aims to cover the whole value creation chain and contain tailor-made funding opportunities for SMEs.

Strengthening innovation capacities

The EU is advancing towards its objective of raising R&D investments to 3% of its GDP, but there is a widening gap between Europe and its world competitors, mainly due to weaker business R&D investment. Investment in research and innovation is therefore seen as crucial, especially in accelerating the development and adoption of innovative business models by SMEs. Some of the ways in which the Innovation Union is addressing innovation skills shortages are: training sufficient numbers of researchers to meet their national R&D targets and to promote attractive employment conditions in public research institutions; developing and promoting e-skills for innovation and competitiveness; supporting an independent multi-dimensional international ranking system to benchmark university performance.

Dr Dröll emphasises that the Innovation Union is primarily about bringing actors together and involving them in the innovation cycle, since SMEs innovate in collaboration with other stakeholders, and not independently: ‘It is this cooperation with big companies in which innovation occurs and SMEs flourish.’ He continues by saying that a broad concept of innovation underpins the Innovation Union - it does not necessarily have to be about high-tech innovation or high-tech SMEs; it also concerns everyone smart enough to combine existing knowledge so that it creates value.

Dr Dröll envisions an Innovation Union where fast-growing SMEs take an active part in creating high added value jobs and innovation supplies products, and which offers solutions that respond to society: ‘Our message for SMEs is very clear - Europe is serious about innovation, we are counting on you.’