Innovation Strategy Management Lecture 20

Programme Part 1 – The basis of Innovation Part 2 – Innovation and New Product Development Part 3 – Innovation and Technology development Part 4 – Innovation and Intellectual Property Part 5 – EU Green paper of Innovation Part 6 – Innovation policies in different countries

Part 5 EU Green Paper of Innovation

Lecture 20: Green Paper of Innovation Innovation in a Strait-Jacket Routes of Actions

Innovation in a strait-jacket Traditional Europe is suspicious and its enterprises tend to shy away from risk. Innovators are not only vulnerable at the outset but are faced with an interminable series of obstacles to creativity. The main handicaps are those affecting the coordination of efforts, human resources, private or public financing and the legal and regulatory environment.

Innovation in a strait-jacket 1.Orienting research towards innovation 2.Human resources 3.Problems with financing 4.The legal and regulatory environment

1. Orienting research towards innovation R&D are an essential component of innovation Europe is faced with four severe handicaps: –Inadequate input –Fragmented efforts –Too little industrial research –Lack of anticipation

2. Human resources a)Poorly adapted education and training systems b)Too little mobility

a) Poorly adapted education and training systems Considerable efforts are being made by teachers in schools and universities and by training personnel to adapt education to the needs of a changing world. Education systems still tend to place excessive stress on academic knowledge, even in science, or to provide highly-specialized technical training. The level and dissemination of technical education is still inadequate in Europe.

b) Too little mobility Innovation thrives on exchange, comparison, interaction and mixing. Cross-fertilization of ideas and personal mobility, particularly between the research world, universities and industry, are important for creating and disseminating new discoveries. One of Europe most remarkable paradoxes: goods, capital and services move around more easily than people and know-how.

3. Problems with financing a)Financial systems which avoid innovation b)Uncertainties and limits of public financing c)An unfavorable tax environment

a) Financial systems which avoid innovation The Communitys ability to innovate depends largely on the effectiveness of its innovation- financing system. Self-financing is naturally the main source of risk investment. Firms often nave to resort to external financing when development, industrialization or commercialization are at stake.

b) Uncertainties and limits of public financing Public funds devoted to innovation include expenditure on education and vocational training, innovation assistance to SMEs infrastructure building and research. The available statistics primarily cover public funds allocated to research. Budgets are dwindling and future is being mortgaged as a result of cutbacks in public spending.

c) An unfavorable tax environment The European tax environment as a whole is not particularly beneficial to innovation. Taxation is an important factor in innovation. –Personal taxation –Company taxation The tax treatment and accounting of intangible investments are generally less advantageous than the treatment of tangible investments.

Company taxation Three different approaches to company taxation relating to innovation can be identified in the EU Member States: –countries which opt for low company tax, based on the theory that innovation will blossom in a favorable climate - United Kingdom; –countries which tax companies fairly leniently while using a variety of measures for boosting certain strongly research- oriented sectors - Spain, France, Italy, Portugal; –countries with some of the highest company tax rates in the EU, but offset by a large number of specific incentives - Belgium.

4. The legal and regulatory environment A suitable legal and regulatory environment would nurture innovation. The rules designed to protect and disseminate innovation (intellectual and industrial property rights and standards) need to be fully utilized. Current legal forms do not really facilitate enterprise cooperation and development at the European level.

The legal and regulatory environment a)Too little use of protection rules b)Standards, certification and quality systems c)Cumbersome administrative formalities d)Legal formulae ill-suited to European cooperation

a) Too little use of protection rules The filing of patents provides a genuine measure of technological activity they have been levelling off to a working extent in Europe ( patents per year), whereas there has been considerable growth in the number of patent applications from abroad (US, Japan).

b) Standards, certification and quality systems All innovation products or processes are developed and realized under framework conditions created by regulations, standards, certification and quality systems. –Process innovation –Voluntary standardization Difference between –«product or service» standardization or certification; –«quality systems » standardization or certification (EN ISO 9000).

c) Cumbersome administrative formalities The regulatory and administrative environment in which companies find themselves is unnecessarily complex.

d) Legal formulae ill-suited to European cooperation The existing legal formulae do not encourage firms to cooperate or to expand on a European scale. The EEIG (European Economic Interest Grouping) is the only statutory instrument in force for European cooperation. Its purpose is to facilitate, develop or improve the results of the economic activity of the Communitys economic operators.

Routes of actions No. Routes of actions 1Develop technology monitoring 2Better direct research efforts towards innovation 3Develop initial and further training 4Further the mobility of students and researchers 5Promote recognition of the benefits of innovation 6Improve the financing of innovation

7Set-up fiscal regime beneficial to innovation 8Promoting intellectual and industrial property 9Simplify administrative procedures 10A favourable legal and regulatory framework 11Develop «economic intelligence» actions 12Encourage innovation in enterprises, escepially SMEs, and strangthen the regional dimension of innovation 13Update public action for innovation