5. A Knowledge-based Europe

5.2 More bang for the knowledge buck

Innovation output in the EU continues to lag behind global competitors. Europe needs to make the most of its R&I. This means turning knowledge results into sustainable solutions with economic value and societal benefits.

Innovation output in Europe is lagging compared to Japan and the United States and displays a mixed performance across EU Member States.

According to the European Commission’s Innovation Output Indicator (IOI), the EU lags behind Japan and the United States in terms of innovation output, mainly due to its poor performance in PCT (Patent Cooperation Treaty) patent applications, reporting very slow progress in recent years. 

Within the EU, Ireland is the best performer, followed by Sweden and Luxembourg. On the contrary, with a declining performance, Greece is at the bottom end of the Index, followed by Lithuania and Romania.

In PCT patent applications, China and Japan have caught up with the West.

The United States remains the world leader in PCT patent applications, despite its share having declined significantly. On the other hand, the EU accounted for 20 % of worldwide PCT patent applications, down from 30 % in 2000.

In 2016, China became a powerhouse in international patent applications, having caught up quickly and is putting additional competitive pressure on the EU. In relative terms, however, China’s performance continues to lag considerably.

Patent activity across EU Member States emphasises the persistent innovation divide.

While, in general terms, north and western Europe perform well, eastern and southern Europe’s patenting performance is poor. On average, the top 10 EU economies have 9 times more patent activity than the remaining 17 Member States.

Sweden followed by Finland and Denmark show the highest shares. Romania, Bulgaria and Croatia have the lowest shares. Over time, with the exception of Croatia and Finland, all the other EU countries have seen their performance improving.

The EU leads patent activity in the fields of energy, climate and transport.

Over time, patent applications worldwide have increased across all societal challenges, in particular in the transport and energy sectors.

Compared to the rest of the world, the EU is more specialised in patenting in the fields of transport, food and bioeconomy and climate. However, it is less specialised in the health and security sectors.

The share of innovative enterprises in an economy also illustrates its innovativeness.

In 2016, nearly half of EU enterprises reported innovation activities. However, across Member States, the landscape varies.

With more resources to invest in R&D, large companies are usually more innovative than SMEs. As regards the types of innovation activities, the share of innovative enterprises in product and process innovation is generally higher than in organisational and marketing innovation.

The economic impact of innovation illustrates the diversity in national economic structures.

South Korea and Japan, with their strong ICT hardware and automotive industries, show higher export shares of medium- and high-tech products than the EU. However, the EU performs better than China and the United States. Within the EU, Germany, with its strong R&D-intensive automotive and equipment industries, has the highest share.

The EU shows the highest share of knowledge-intensive service exports, ahead of other international competitors. On the other hand, it lags behind the United States, Japan and South Korea in employment in knowledge-intensive activities.

Reinforcing the knowledge valorisation policy in the EU is essential.

It is necessary to move towards a more holistic approach to understand how knowledge is valorised, i.e. the process of creating value from knowledge and turning the results into sustainable solutions with economic value and societal benefits.

If Europe wants to catch up and become more competitive internationally, it needs to address its deficiencies by promoting a culture of knowledge valorisation in the European R&I system. Ensuring that knowledge-based institutions know how to manage their intellectual capital and improving the links between academia, industry, citizens and policymakers are essential to enabling innovation to flourish in Europe.