Archive:Europe 2020 indicators - R&D and innovation

Data from March 2017. Most recent data: Further Eurostat information, Main tables. Planned article update: July 2017.

This article is part of a set of statistical articles on the Europe 2020 strategy. It provides recent findings on research and development (R&D) and innovation in the European Union (EU).

The Europe 2020 strategy is the EU’s agenda for growth and jobs for the current decade. It emphasises smart, sustainable and inclusive growth as a way to strengthen the EU economy and prepare its structure for the challenges of the next decade.

R&D and innovation are key policy components of the Europe 2020 strategy. Innovative products and services not only contribute to the strategy’s smart growth goal but also its inclusiveness and sustainability objectives. Introducing new ideas to the market promotes industrial competitiveness, job creation, labour productivity and the efficient use of resources. R&D and innovation are also essential for finding solutions to societal challenges such as climate change and clean energy, security and active and healthy ageing.

Europe 2020 strategy target on R&D

The Europe 2020 strategy sets the target of ‘improving the conditions for innovation, research and development’ , in particular with the aim of ‘increasing combined public and private investment in R&D to 3 % of GDP’ by 2020 .

The analysis in this article focuses on the headline indicator 'gross domestic expenditure on R&D', which monitors the strategy’s research and development target. Fundamental enabling factors that drive innovation are also discussed. These are the first link in the innovation chain and include R&D investment in EU Member States and its distribution across regions and the various public and private societal actors. The role of education, in particular tertiary education in science and technology, in providing the necessary human capital for the knowledge-based society is also highlighted. In addition, the economy’s capacity for R&D and innovation in terms of skilled workforce is examined. This is followed by a look at the EU’s performance concerning innovative business frontrunners and the technological output at the end of the innovation chain in terms of commercialisation and internationalisation. These indicators complement the input perspective of the ‘R&D intensity’ headline indicator with a measure referring to the output and outcome dimensions of innovation.

Key messages

• Between 2013 and 2015 gross domestic expenditure on R&D as a percentage of GDP in the EU stagnated at 2.03 %. The gap between the current performance and the 3 % target has yet to be closed.
• The business sector remains the main source of financing for R&D activities in the EU. Although the higher education and government sectors have lower R&D shares, they have been more resilient to economic fluctuations.
• R&D expenditure is highest in northern and western European countries, which are also characterised by predominantly business-financed R&D.
• The EU increased its output of tertiary graduates in science and technology by 17.9 % between 2008 and 2012.
• Employment in knowledge-intensive activities increased in almost all EU Member States, however, the United States and Japan still outperform the EU in that respect. Countries with large financial and ICT sectors relative to their GDP report the highest employment in knowledge-intensive activities in the EU.
• The share of R&D personnel in the labour force reached 1.2 % of total employment in 2015. The business sector employs more than half of this workforce.
• Almost half of the EU’s enterprises reported some kind of innovation activity in 2014. Member States with a relatively high GDP per capita had the highest number of innovative enterprises.
• A third of the EU’s innovative enterprises were engaged in some form of co-operation with other enterprises or institutions during the period 2012–2014.
• Since 2008, the number of EU patent applications has stabilised at about 57 000.
• High-tech exports to outside the EU doubled between 2007 and 2015.

Table 1: Indicators presented in this article

Main statistical findings

Investment in research and development in the EU

Figure 1: Gross domestic expenditure on R&D, EU-28, 2002–2015
(% of GDP)
Source: Eurostat online data code (t2020_20)

The headline indicator ‘ gross domestic expenditure on R&D’, also referred to as R&D intensity, shows the proportion of gross domestic product (GDP) dedicated to research and development .

After a period of somewhat continuous growth between 2007 and 2014, R&D expenditure in the EU reached 2.04 % of GDP in 2014, up from 1.77 % in 2007. However, progress has been slow and the most recent figures point to a stagnation, with the 2015 R&D expenditure decreasing slightly to 2.03 % of GDP, which has moved the EU further away from its 3 % target. The slow increase since 2007 contrasts with the prolonged stagnation experienced between 2002 and 2007, when EU R&D expenditure remained more or less stable at around 1.77 % of GDP. Overall, R&D intensity emerged stronger from the economic crisis as a result of depressed GDP growth and increased public funding for R&D expenditure in many Member States.

At the global level, the EU’s R&D intensity is still lagging behind other advanced economies, such as the United States, Japan and South Korea, with only the best performing Member States surpassing the United States (see Figure 2). The EU’s relative position in the global R&D landscape has also weakened because of the rapid rise of R&D expenditure observed in China. In 2014, China overtook the EU by spending the equivalent of 2.05 % of its GDP on R&D.

R&D spending has risen in three quarters of Member States since 2008

In 2015, R&D intensity ranged from 0.46 % to 3.26 % across the EU (see Figure 2). Northern Member States Finland and Sweden did not only share a pattern of high expenditure, they have the most ambitious national targets. In 2015, Denmark slightly exceeded its R&D target of 3 %, while Slovakia, Cyprus and Germany came very close to meeting their targets of 1.2 %, 0.5 % and 3 %, respectively.

Lower R&D intensity levels, below 1 %, were mostly recorded in eastern and southern Member States. Patterns in R&D investment, in particular business R&D spending, between countries generally mirror the industrial structure of economies, differences in the knowledge intensity of sectors and their research capabilities .

Figure 2: Gross domestic expenditure on R&D, by country, 2008 and 2015
(% of GDP)
Source: Eurostat online data code (t2020_20)

R&D intensity increased in most Member States between 2008 and 2015. This was mainly due to a slowdown in GDP growth, along with a rise in nominal government spending on R&D in many EU countries. Nevertheless, countries with very high levels of R&D intensity (Sweden and Finland), moderate levels (Luxembourg and Portugal) and very low levels (Croatia and Romania) alike suffered negative trends in R&D expenditure in that period. It is to be noted that Finland was a leader in R&D intensity in 2008, but its spending contracted to below 3.00 % of GDP in 2015. As mentioned in European Commission report Science, Research and Innovation Performance in the EU, the negative trends experienced in both Finland and Sweden could be partly attributed to difficulties in their information and communication technology (ICT) sectors. Growth in R&D expenditure between 2008 and 2015 was most pronounced in some central and eastern European economies that generally have low levels of spending, such as Slovakia and the Czech Republic.

The business enterprise sector is the biggest investor in R&D

R&D activities are carried out by four main institutional sectors, namely business enterprise, government, higher education and the private non-profit sector. Figure 3 shows how R&D expenditure was distributed between these four sectors in 2015. The business enterprise sector was the biggest investor, accounting for 64.0 % of total R&D expenditure in the EU (EUR 191.2 billion). Next was the higher education sector, which invested almost three times less in R&D than the business sector (EUR 69.4 billion).

Figure 3: R&D expenditure, by sectors of performance, EU-28, 2015
(%)
Source: Eurostat online data code (rd_e_gerdtot)

Although the government sector’s investment share was more modest at 12.0 % (EUR 35.7 billion), its role remains important, especially for the long-term stability of R&D expenditure. This includes investing in ‘far from the market’ research and research that is of social or environmental importance (for example, health, quality of life, environment and defence). It also includes financing infrastructure for scientific research, establishing the basis for R&D activities and compensating for reduced business R&D expenditure during economic downturns to help avoid a decline in the build-up of capital stocks and harm to long-term productivity growth . The private non-profit sector provides a very small amount of funds for R&D (EUR 2.5 billion), making its share almost negligible at less than 1 %.

All R&D sectors in the EU experienced increases in their R&D expenditure as a percentage of GDP between 2002 and 2015, except for the private non-profit sector (see Figure 4). Business-financed R&D intensity grew the most, by 0.15 percentage points. Apart from stalling in 2007 and 2010, its R&D intensity has been rising slowly since 2005. The higher education sector’s R&D intensity rose at just half the pace over the same period, while government-financed R&D grew marginally by only 0.01 percentage points.

Figure 4: Gross domestic expenditure on R&D, by sectors of performance, EU-28, 2004–2015
(% of GDP)
Source: Eurostat online data code (rd_e_gerdtot)

As Table 2 shows, annual changes in total R&D expenditure are mainly influenced by R&D trends in the business sector. This is not surprising as the private sector is the major source of R&D finance. Business R&D expenditure typically follows the cyclical patterns of GDP growth. Indeed, the sharpest drop in total business R&D spending coincided with the slump in GDP growth in 2009, whereas its peaks in 2006 and 2011 occurred during or after economic upturns. Apart from brief interruptions in 2009 and 2013, business R&D spending has increased annually at a relatively high rate. In contrast, public sector R&D expenditure (higher education and government) has been less cyclical and has grown more slowly. However, there have been exceptions. The education sector outpaced business in terms of R&D spending growth over the period 2007–2010 and the government sector’ R&D expenditure grew faster in 2008–2009 and more recently in 2015. Overall, for all sectors annual growth in R&D expenditure has still not recovered to the levels seen before 2009.

Table 2: Gross domestic expenditure on R&D, by sector of performance, EU-28, 2006–2015
(% change over previous year) (²)
Source: Eurostat online data code (rd_e_gerdtot)

In many EU Member States, direct government R&D funding is complemented by indirect support for business R&D in the form of tax incentives. Overall, R&D tax incentives play either an important or a dominant role in addition to direct funding for business R&D in half of the Member States, and these countries increased their use during the crisis years (European Commission, 2016, p.143).

Another important source of R&D finance has come from European funds, in particular through the EU Research Framework Programme and the EU Structural Funds. According to recent estimates, 20 % of the increase in public R&D expenditure between 2007 and 2012 could be attributed to ‘funding from abroad’, mainly from the EU budget (European Commission, 2016, p.28), which was an important addition to the 69 % increase that came from national public spending. Although most funds from EU research programmes flow to large, research-intensive Member States that joined the EU before 2004, they have made substantial contributions to public funding in several small Member States with low R&D capacity that joined more recently (European Commission, 2016, p.145). There has also been an important shift in the use of Structural Funds, with a growing share being channelled into R&D spending (European Commission, 2016, p.160).

Figure 5: Gross domestic expenditure on R&D, by sectors of performance, by country, 2015
(% of total)
Source: Eurostat online data code (rd_e_gerdtot)

As Figure 5 shows, the business sector is the largest source of R&D funding (above 60 %) in the most research-intensive countries. In the least research-intensive countries, such as the Baltic countries and some southern and eastern Member States, the public sector — higher education and government — tends to provide the most R&D funding. There are, however, exceptions to this pattern in the east (Hungary, Bulgaria and Croatia) and the south (Italy and Spain). In general, low business sector R&D intensity in Member States indicates that the broader innovation system and framework conditions for this type of investment are still insufficiently attractive (see Innovation Union Competitiveness Report 2013, p.38). Although the public R&D system drives the generation of knowledge and talent needed by innovative enterprises, it is only through business investment that the full impacts of R&D can be realised. Business R&D integrates and transforms available knowledge into commercially viable technologies and innovation such as greener products, processes and services that enable higher labour productivity, industrial competitiveness, resource efficiency and reduced environmental impacts.

R&D intensity concentrated in regions in Germany, the United Kingdom, Nordic countries, Austria, Belgium and Slovenia

When analysing R&D intensity by region (see Map 1), a high level of R&D spending can be seen in 30 of the NUTS 2 regions: in Germany (10 regions), the UK (four), Sweden (four), Austria (four) and Finland (three), followed by regions in Denmark and Belgium (two regions each) and Slovenia (one region). Some research-intensive ‘clusters’ also become apparent: in particular, a band of research-intensive regions running from Finland through southern Sweden into Denmark; another band from the United Kingdom, through Belgium into southern Germany; and a final band going from Slovenia, through Austria and Switzerland into southern France and northern Spain. This geographical concentration of R&D activities is a common phenomenon. R&D clusters often develop around academic institutions or specific high-technology industrial activities and knowledge-based services, where they could benefit from a favourable environment and spill over of knowledge. Due to clusters many regions attract new start-ups and highly qualified personnel and develop a competitive advantage in specialised activities.

Three regions in the EU had a particularly pronounced R&D intensity. In 2013, the regions of Stuttgart and Braunschweig in Germany reached R&D intensity of 6 % of GDP and 7.3 % of GDP, respectively. Even higher was the share in Belgium's Brabant Wallon province, where R&D intensity peaked at 11.4 % of GDP, more than five times the EU average. It should be noted that this high share is partly explained by the high number of commuters from Brabant Wallon to the Brussels regions, who contribute to the GDP of Brussels and lower the GDP of Brabant Wallon. At the other end of the scale, the 42 regions with R&D intensity below 0.5 % of GDP mainly belong to southern or central EU Member States: Romania, Bulgaria, Greece and Poland (six regions each), Bulgaria (five regions), Portugal (four regions) and Spain (three regions).

Map 1: Gross domestic expenditure on R&D, by NUTS 2 regions, 2013(¹)
(% of GDP)
Source: Eurostat online data code (rd_e_gerdreg)

The capital regions recorded the highest levels of R&D intensity in 11 multi-regional EU Member States. In addition, in 20 countries, the capital regions’ R&D intensity exceeded the national average but was not necessarily the highest in the country. Only the United Kingdom, Belgium and the Netherlands clearly went against this trend, with capital regions’ R&D intensity below the national average. Regional disparities in R&D intensity within countries were largest in the United Kingdom, Belgium and Spain and smallest in Slovenia, Hungary, Croatia and the Netherlands.

Map 2: Change in gross domestic expenditure on R&D, by NUTS 2 regions, 2007–2013 (¹)
(percentage points difference between 2013 and 2007, % of GDP)
Source: Eurostat online data code (rd_e_gerdreg)

Changes in R&D intensity over time are presented in Map 2. Of the 240 regions for which data for both years is available, 48 experienced a decline in R&D intensity between 2007 and 2013. This decline was below one percentage point in all regions except for three regions in the United Kingdom, namely Essex, Lancashire and Kent. In the remaining 192 regions, R&D intensity remained stable or increased between 0.01 percentage points and 4.63 percentage points (Belgian Brabant Wallon).

While EU funding seeks to target all regions, an innovation divide across the EU’s regions remains. There appears to be a regional innovation paradox, whereby those regions characterised by established innovative activity maintain their position as innovative leaders (such as the Nordic countries), while those that trail behind fail to catch up, despite targeted funding and policy prescriptions.

Building the knowledge base for research and innovation

Knowledge and skills are crucial for gaining new scientific and technological expertise and for building an economy’s capacity to absorb and use this knowledge. R&D expenditure is a vital enabling factor for human capital as it supports knowledge generation and skills development. Highly skilled human resources in turn are necessary for the EU’s research and innovation capacity and competitiveness. However, at a time of increasing technological needs and an ageing population, current skill mismatches pose a challenge for the supply of a highly qualified workforce. According to projections from the European Centre for the Development of Vocational Training, around 16 million more highly qualified people will be needed in the EU by 2025 (Cedefop) . In particular, as emphasised by the European Commission in the Staff Working Document A Rationale for Action, demand for scientists, researchers and engineers will grow (also see the articles on 'Employment' and ‘Education’).

Increasing number of science and technology graduates in the EU

In line with the EU’s declared intention to become the world’s most competitive science-based economy, a well-functioning research and innovation system is expected to promote excellence in education and skills development and ensure a sufficient supply of (post)graduates in science, technology, engineering and mathematics. Increasing the number of science graduates and jobs in knowledge-intensive activities would help to create a solid base for the EU knowledge economy and contribute to Europe 2020’s objectives by fostering the EU's innovation capacity, economic strength and employment.

Despite some challenges regarding science education — in particular disparities in basic science literacy and quality of science education, as well as gender imbalances in science education across countries and regions — the EU has a good basic education system (see European Commission, 2011, p.11 and p.36). A growing number of EU students graduate from tertiary education in science and technology.

Figure 6 shows how this trend has developed over the past years. Between 2008 and 2014 the number of tertiary graduates in science and technology grew by 25.5 %, from 14.5 graduates per 1 000 population aged 20 to 29 to 18.2 graduates per 1 000 population in the same age group. The EU’s international position has also improved constantly since 2003 and it is now outperforming Japan and the United States. However, the EU’s progress in tertiary education needs to be interpreted with caution since the growth in the number of science and technology graduates might be somewhat overstated by the Bologna effect. This effect results from counting twice as tertiary graduates students who firstly complete a bachelor and then a master degree. Furthermore, concerning the EU’s position in the world, one should also note that the cohort size in the EU has developed less dynamically compared to the US. Therefore, the EU has seen a relatively less positive trend in the absolute number of graduates.

Figure 6: Tertiary graduates in science and technology, by country, 2008 and 2014
(Graduates per 1 000 population aged 20 to 29 years)
Source: Eurostat online data code (tps00188) and (educ_uoe_grad04)

At Member State level, the trend varies considerably (see Figure 6). In 2014, the number of science and technology graduates ranged from about 24.7 per 1 000 inhabitants in Ireland to 9.2 per 1 000 inhabitants in Cyprus and 3.5 per 1 000 inhabitants in Luxembourg. The very low ratio of science graduates in Luxembourg and Cyprus might be explained to a large extent by the number of students who pursue their studies abroad. Since some of the graduates reported by a country may be foreigners who return home following their studies, this pushes up the ratio in the country where they studied and pulls down the ratio for their country of origin. In all Member States, except Finland, Lithuania and Romania, the rates of tertiary graduates have increased since 2008. Between 2008 and 2014, the tertiary graduate rates in Malta and Cyprus more than doubled, while the rate grew by more than 50 % in Austria, Slovenia, Spain and Hungary.

Empowering women in tertiary education and enhancing their employment opportunities in the R&D sector is also an essential part of the EU’s research and innovation policy. Ensuring gender equality and integrating the gender dimension in research and innovation is one of the European Commission’s main five priorities set out in the 2012 Communication ‘A Reinforced European Research Area Partnership for Excellence and Growth' and a key element of the Horizon 2020 programme. Improving gender equality in science education can promote research, innovation and ultimately long-term growth by increasing the number of scientists and engineers. It is also important for reducing occupational segmentation in the labour force and improving gender equity in the labour market .

Despite the growth of female tertiary graduates in science over the past few years, women still engage in different fields of study than men and remain under-represented in science and technology fields in all Member States (see Figure 6). For instance, according to the latest ‘She Figures’ publication' by the European Commission, men are more than two times more likely than women to choose engineering, manufacturing and construction, while women are twice as likely to pursue an education degree. It is generally accepted that, among other factors, differences in the educational pathways of women and men may have some impact on the gender segregation in employment. Occupational segregation, understood as under- (over-) representation of a given group in occupations or sectors (e.g. female-dominated primary education and care sector and male-dominated technical occupations), may contribute to wage inequalities and threatens to exacerbate labour and skill shortages. The share of women in science and technology fields declines further at the postgraduate level and even more so after the transition to the workplace: In 2012 women accounted for 47 % of PhD graduates (ISCED 6: post-graduate programmes above master’s level ), but made up only 33 % of researchers and 21 % of top-level researchers (grade A) (see ‘She Figures’, 2016, p. 5-6).

More than one third of the EU labour force is employed in knowledge-intensive activities

The pursuit of innovation is not an end in itself. It can have far-reaching impacts because it drives productivity, supports long-term growth and generates high-quality jobs. Innovation can also shift a country’s economic structure towards more knowledge-intensive activities with higher added value . This structural change has important implications for employment as it helps accommodate and stimulate the further development of a highly skilled labour force. Therefore, the indicator on employment in knowledge-intensive activities as a percentage of total employment shows how the supply of highly skilled labour feeds into the economic structure of a country.

Employment in knowledge-intensive activities accounts for more than one third of total employment in the EU. Between 2008 and 2015 this share increased slightly, from 34.2 % to 36.0 %.

As shown in Figure 7, countries in eastern and southern Europe, except for Cyprus and Malta, recorded employment shares in knowledge-intensive activities below the EU average. Luxembourg led the ranking, with more than half of workers employed in fields requiring a high level of knowledge and education. This could be explained by the major importance of financial services in the economy. A further five countries, most of them located in northern Europe and with large financial or ICT sectors relative to their GDP, also recorded rates above 40 %.

Figure 7: Employment in knowledge-intensive activities, by country, 2008 and 2015
(% of total employment)
Source: Eurostat online data code (htec_kia_emp2)

Between 2008 and 2015 the employment share in knowledge-intensive activities increased in all Member States, except for Luxembourg and Italy, which experienced a 3.1 and 0.2 percentage points reduction, respectively. The highest increases of more than five percentage points were registered in Estonia as well as in some small southern Member States (Croatia, Portugal and Malta).

These findings should take into consideration that a growing share of employment in knowledge-intensive activities might not necessarily indicate that a country is moving towards a more knowledge-based economy. This could also be a result of employment in non-knowledge-intensive sectors decreasing more than employment in knowledge-intensive activities. In fact, this seems to be the case for countries such as Greece, Spain, Italy and the Netherlands, which experienced reductions in both total employment and in employment in knowledge-intensive activities in absolute values between 2008 and 2015 . On the other hand, increased employment in sectors not considered knowledge-intensive would lead to lower values for the analysed indicator, even if this employment is a result of significant investments in innovation in these sectors .

Figure 8: R&D personnel, by sectors of performance, EU-28, 2015
(%)
Source: Eurostat online data code (rd_p_persocc)

In 2015, 44.2 % of women employed in the EU were working in knowledge-intensive activities. In contrast, the share was only 29.1 % for men . While half of all men employed in knowledge-intensive activities were working in the business sector, this was the case for only 30 % of women.

The improvement in the EU’s scientific tertiary education output has been complemented, to a varying extent, by national measures intended to attract a highly qualified workforce and human resources, including women, to science and research (see European Research Area, Facts and Figures for 2014, p.22). At the EU level, R&D personnel — researchers and other staff employed directly in R&D — accounted for 1.2 % of the labour force in 2015 . The business enterprise sector was the biggest employer of R&D personnel, providing jobs for more than half of this workforce. The higher education sector was the second most important employer of R&D professionals.

Similar to the evolution of R&D intensity, the share of R&D personnel in the labour force increased marginally between 2002 and 2015 (0.26 percentage points). This trend was mainly driven by the business enterprise sector, where the share of R&D personnel grew by 0.17 percentage points. The government and the higher education sector showed much smaller increases of 0.06 and 0.02 percentage points, respectively. The private non-profit sector maintained its almost negligible share of 0.01 % between 2002 and 2015.

Introducing innovative ideas to the market: the role of the business sector

A dynamic business environment is essential for the promotion and diffusion of innovation. The challenge is to make use of R&D through fostering entrepreneurship and creativity to trigger innovation and economic competitiveness. Therefore, measures targeting knowledge diffusion and absorption of ideas and innovations, for example, through the creation of technology markets and licensing schemes, are just as important as investment in knowledge generation. The higher the uptake and use of ideas from R&D, the more likely innovative players are to invest in future knowledge generation through increased private R&D expenditure. Innovators also help to create a more dynamic innovation system. In many cases they contribute to the structural and technological changes needed to adapt to new circumstances and challenges. An example is the depletion of fossil fuels and the resulting transition towards more renewable energy sources.

Progress in achieving knowledge diffusion and absorption can be measured through data on the number of innovative companies, patent applications and exports of high-tech products, among others. Other attempts to measure innovation include composite indices such as the 'European Innovation Scoreboard' and the 'Eco-Innovation Index'.

The 'European Innovation Scoreboard' is a policy instrument used by the European Commission to compare Member States’ research and innovation performance. Based on a composite indicator, known as the innovation index, it forms a comprehensive benchmarking and monitoring system of research and innovation trends in Europe .

Eco-innovation is any innovation that reduces the use of natural resources and decreases the release of harmful substances across a product’s whole life cycle, bringing both economic and environmental benefits. Environmental benefits include improved resource productivity, in particular better material and energy efficiency, lower greenhouse gas (GHG) emissions and reduced waste generation, which is beneficial for companies and end users. All types of innovation can become eco-innovation as long as they bring environmental benefits. Eco-innovation can, therefore, introduce to the market a new good or service, process, organisational change or marketing method. It can also have implications at the wider economic and societal level (for example, new urban design or new transportation systems).

The Eco-Innovation Scoreboard is a policy tool that helps measure eco-innovation performance and assess whether the EU and its Member States are moving towards smart and sustainable growth, as requested by the Europe 2020 strategy .

Almost half of EU enterprises perform innovation activities

Almost half (49.1 %) of EU enterprises reported innovation activity between 2012 and 2014 (see Figure 9). The share has remained relatively stable since the previous biennial Community Innovation Survey (CIS) in 2012 (48.9 %) . The share of innovative enterprises is broadly linked with GDP per capita levels. By far, the highest share of innovative enterprises was observed in Germany (67.0 %), but other countries with high GDP per capita and productivity levels such as France, the Benelux and northern European countries also seemed to provide a favourable environment for innovative business activities (55 % or more innovative enterprises) . These countries also share a high proportion of medium-high and high-tech manufacturing companies or a high proportion of knowledge-intensive services (ICT, finances). The share of innovative enterprises therefore seems to be also linked to economic structures. Similar to R&D intensity, a west-east divide could be observed, with businesses in eastern European countries with below EU-average income per capita recording the lowest innovation activity.

Innovative companies can be distinguished by the type of innovation they pursue. Figure 9 shows how different business strategies lead to different innovation types such as product, process, organisational or marketing innovation. More than a quarter (27.3 %) of EU enterprises reported an organisational innovation that involved implementing a new organisational method in the enterprise's business practices, workplace organisation or external relations. Product innovation related to the launch of new or significantly improved goods or services was the second most common innovation activity reported by enterprises (23.9 %).

Figure 9: Enterprises by type of innovation, EU-28, 2014
(% of the total number of enterprises)
Source: Eurostat online data code (inn_cis9_type)

Complex innovations with the highest potential for boosting productivity and growth often depend on the ability to draw on diverse sources of information and knowledge, or to collaborate on the development of an innovation. Innovation co-operation, which measures amongst other things the flow of knowledge between public research institutions and enterprises and between enterprises and other enterprises, provides an important indication of enterprises’ innovation activity.

A third (33.1 %) of EU enterprises that conducted product and process innovation activities were also engaged in innovation co-operation arrangements during 2012–2014. The United Kingdom stands out in this context with a particularly high level of innovative enterprises involved in co-operation activities — 61.4 %, which is double the EU average. At the other end of the scale, enterprises in some of the southern European countries were less likely to participate in collaborative knowledge creation. Interestingly, the EU leader in innovative enterprises — Germany — showed a comparatively low share of enterprises engaged in collaboration. In contrast, some Baltic and eastern European countries with a relatively low share of innovative enterprises displayed above average innovation co-operation.

Figure 10: Innovative enterprises engaged in any type of co-operation, by country, 2014
(% of product and/or process innovative enterprises)
Source: Eurostat online data code (inn_cis9_coop)

Stagnation in the number of EU patent applications since 2008

The more cutting-edge knowledge is produced, the more likely it is to spill over into new products and private R&D activities. In this regard, patents provide a valuable measure of the exploitation of research results and of the inventiveness of countries, regions and enterprises. Patenting has a strategic role in supporting the Europe 2020 strategy. Introducing innovative ideas to the market through patenting helps improve the EU’s competitiveness and productivity, which underlie economic growth and employment, and brings long-term benefits to the economy at large through the wide diffusion of knowledge.

In 2012, the total number of patent applications in the EU was 10 % higher compared to the level a decade earlier. Patent applications had been steadily increasing until 2008, but have since stabilised at around 57 000. The largest decrease in patent filings coincided with the slowdown in economic growth in 2008 and later in 2012. This might be explained by the fact that many industries reduce their R&D budgets and expenditure on the application and maintenance of intellectual property rights during an economic downturn .

Figure 11: Patent applications to the European Patent Office (EPO) by priority year by international patent classification (IPC) sections and classes, EU-28, 2002–2012
(number)
Source: Eurostat online data code (pat_ep_nipc)

The most prolific technology fields in terms of EU patents are performing operations and transporting, electricity and human necessities (see Figure 11). These three sectors accounted for half of all EU patent applications in 2012 (54 %). Trends for total patent filings in the individual sectors tended to follow the overall trend. The sectors experiencing the most growth in the number of patent applications between 2002 and 2012 were mechanical engineering, lighting, heating, weapons and blasting (27 %) and fixed constructions (35 %).

High-tech exports to non-EU countries have doubled since 2007

Beyond turning research results into tangible applications, innovative businesses compete globally to sell their high-tech products on the world market. The volume of high-tech trade provides an indication of EU enterprises' ability to commercialise their R&D and innovation outputs globally. It also reflects the specialisation of countries in producing medium and high-tech products that result from innovation and contributes to an economy’s balance of trade and international competitiveness. The creation, exploitation and commercialisation of high-tech products is associated with high value added for the economy and knowledge-intensive and remunerative jobs. Therefore, high-tech trade also contributes to the Europe 2020 strategy’s priorities for smart and inclusive growth.

Figure 12: High-tech trade by group of products in million euro export, EU-28, 2007–2015
( EUR million)
Source: Eurostat online data code (htec_trd_group4)

Between 2007 and 2015 the value of high-tech exports to outside the EU grew by more than 50 %, from EUR 199 billion to EUR 304 billion. This was a result of continuous growth, which was interrupted only briefly during the economic downturn in 2009. The main drivers behind the development of the EU’s high-tech exports since 2007 were the pharmacy and aerospace sectors, which increased by 145 % and 114 %, respectively. In particular, the EUR 45 billion increase in exports of aerospace high-tech accounted for almost half of the growth in total extra-EU exports. Within high-tech exports, aerospace was also the product group with highest exports (EUR 84 billion), followed by pharmacy (EUR 60 billion) and electronics and telecommunications (EUR 59 billion). In terms of destination, the United States and China were the main importers of EU high-tech products in 2015, with shares of 26 % and 10 %, respectively .

Outlook towards 2020

The Europe 2020 strategy tries to overcome the economic crisis and its impacts by addressing the structural weaknesses of the EU economy. It also attempts to create the conditions for smarter growth through more effective investments in education, research and innovation.

However, R&D intensity, the headline indicator for the strategy’s smart growth priority, is expected to remain below the 3 % objective that the EU has set itself for 2020. In 2015, R&D expenditure as share of GDP was at 2.03 % and had shown only limited progress over time, despite increases in public and private R&D expenditure since 2007. Estimates show that to meet the 2020 R&D target, EU R&D intensity would need to grow three times as fast as it did between 2007 and 2014 — 6.7 % versus 1.9 % annually (European Commission, 2016, p.30) . According to the latest projections, if the 2007–2014 trend continues, investment in R&D is forecast to rise to only 2.28 % by 2020 (European Commission, 2016, p.30). Progressing more rapidly towards the 3 % target would require a faster structural shift to more knowledge-based economic activities.

R&D intensity could reach 2.6 % if Member States meet their national targets. However, progress towards these has been uneven. In 2015, Denmark had already met its national targets, while Slovakia, Cyprus and Germany came very close, with a gap of 0.02, 0.04 and 0.13 percentage points, respectively, to be closed by 2020. However, most Member States still need to significantly accelerate their R&D intensity growth to be able to meet their respective national targets (European Commission, 2016, p.36). In terms of building up the necessary human capital, it has been estimated that the EU will need to train and employ at least one million new researchers compared with 2008 levels if it is to reach its 3 % R&D target (see Researchers’ Report, 2014, p.54).

Although factors influencing R&D investment tend to be very context-specific, the European Semester Country Reports, published by the European Commission as part of the Europe 2020 policy cycle, identify some persistent challenges in the European research and innovation system that impede progress towards the Europe 2020 priorities. According to the European Semester Thematic Factsheet, Research and Innovation 2016, these bottlenecks could be grouped in three main categories and include: overall low quality of the research and innovation system in some Member States, mainly a result of their lower public R&D investment; weak knowledge flows and science-business; and insufficiently attractive framework conditions for R&D investment and entrepreneurial activity.

A number of EU policy actions and instruments have been put in place to address these challenges, the ‘Innovation Union’ initiative being one of the most prominent of these. It places renewed emphasis on public sector intervention to stimulate the private sector and remove bottlenecks to enable the EU’s scientific expertise to be converted into marketable goods and services. More specifically this initiative puts emphasis on the challenges facing society, such as climate change.

Delivery of the actions set out in the ‘Innovation Union’ is on track, but with various levels of implementation. In particular, the initiative has not succeeded in closing the innovation performance gaps between EU countries. However, it has reduced the gap between the EU and its main competitors (see Taking stock of the Europe 2020 strategy for smart, sustainable and inclusive growth – Annexes 1 to 3, 2014, p.32).

Data sources and availability

Indicators presented in the article:

• Gross domestic expenditure on R&D (t2020_20)
• Gross domestic expenditure on R&D by sectors of performance (rd_e_gerdtot)
• Total R&D personnel by sectors of performance, occupation and sex (rd_p_persocc)
• Gross domestic expenditure on R&D by NUTS 2 regions (rd_e_gerdreg)
• Tertiary graduates in science and technology (tps00188 and educ_uoe_grad04)
• Employment in knowledge-intensive activities by sex (htec_kia_emp2)
• R&D personnel by sectors of performance (rd_p_perslf)
• Enterprises by types of innovation (inn_cis9_type)
• Innovative enterprises engaged in any type of co-operation (inn_cis9_coop)
• Patent applications to the EPO by priority year by international patent classification (IPC) sections and classes (pat_ep_nipc)
• High-tech trade by group of products in EUR million (htec_trd_group4)

Context

R&D and innovation contribute to a well-functioning knowledge-based economy. Most importantly, they are central to providing the scientific and technical solutions needed to meet global societal challenges such as climate change and clean energy, security, and active and healthy ageing. For instance, technological advances in materials science and digitalisation, are driving rapid progress in renewable energy and energy efficiency as well as other sectors important for sustainable development and climate change mitigation such as transport, construction, manufacturing, agriculture and consumer goods . However, development of new technologies alone will not be enough to solve many of the ‘grand’ societal challenges. Fundamental transformations in businesses and manufacturing processes, provision of services, the way society organises itself and other non-technological innovations will be equally important.

The challenges facing society also pose threats to the well-being of the population and can have dire social, economic and environmental implications inside and outside the EU. Research and innovation can not only help in addressing these challenges, but also in exploiting the new market opportunities they offer.

A number of important EU policy strategies and initiatives address such win-win situations. In particular, the ‘Innovation Union’ flagship initiative aims to create an innovation-friendly environment for EU researchers and entrepreneurs, which makes it easier for new ideas to be turned into products and services.

Horizon 2020, the EU’s research and innovation programme for the period 2014–2020, is the financial instrument for implementing the ‘Innovation Union’. Following up on the previous EU research framework programmes, it provides nearly EUR 75 billion of funding for research projects aimed at tackling societal challenges, generating excellence in science, and fostering industrial leadership .

The EU Action Plan for the Circular Economy, included in the Circular Economy package, proposes actions that will contribute to ‘closing the loop’ of product life cycles through greater recycling and re-use, and will bring benefits for both the environment and the economy. Similarly, the Roadmap to a Resource Efficient Europe supports the shift towards a resource-efficient, low-carbon economy, while bringing new economic opportunities, sources of growth and jobs and increased competitiveness through improved efficiency.

Realising these benefits crucially depends on a well-functioning research and innovation system, including the sufficient supply of scientists and researchers. To achieve this goal Horizon 2020, the European Research Area (ERA) and other policy initiatives aim to support researchers’ careers and mobility, attract young people to science, enhance the quality and efficiency of doctoral training and encourage partnerships between academia and industry (see State of the Innovation Union 2015).

The importance of R&D and innovation for fulfilling the ambitions of the Europe 2020 strategy is evident in the close interlinkages between them and the strategy’s other objectives. The R&D target is closely related to the strategy’s tertiary educational attainment and employment targets (see the articles on 'Employment' and 'Education').

Public investment in R&D generates the knowledge base and talent that higher education and innovative companies need. Higher public investment in R&D also leverages private investment in research and innovation, providing new jobs in business and academia and ultimately increasing demand for scientists and researchers on the labour market. R&D investment spurs innovation, which contributes to industrial competitiveness and job creation.

The Europe 2020 target on R&D is also linked to the strategy’s climate change and energy targets (see the article on 'Climate change and energy'). In particular, the transition to a green and low-carbon economy and adaptation to climate change will require significant innovation, from small incremental changes to major technological breakthroughs.

See also

• Europe 2020 headline indicators

Further Eurostat information

Publications

• Smarter, greener, more inclusive? - Indicators to support the Europe 2020 strategy

Main tables

• Europe 2020 indicators

Dedicated section

• Europe 2020 indicators

Methodology / Metadata

• Towards robust quality management for European Statistics - Communication from the Commission COM(2011) 211 final

Other information

• Regulation 223/2009 of 11 March 2009 on European statistics

External links

• European Commission website on the European Semester