What the EU must do to (really) stimulate innovation. Reports
The conclusions of the report “ EU Innovation Policy: How to escape the middle technology trap ” by the European Policy Analysis Group, dedicated to innovation policies in the European Union
This section makes a concrete policy proposal to increase the EU 's innovation capacity.
Reallocation towards disruptive innovation
Panel (a) of Figure 10 describes the status quo by illustrating the reported balance for 2024 of the key components of the EU innovation ecosystem.
Our proposal is divided into five phases:
- Reform the governance of the EIC, hiring more independent and highly qualified program managers and giving them greater discretion in selecting and managing projects. Streamline management practices and simplify the application process. Develop a process that allows leading, committed scientists to cast the deciding vote on the best proposals.
- Progressively reduce the European Institute of Innovation and Technology (EIT) and the European Innovation Ecosystem (EEI). However, current EIT projects (CCIs) are expected to become financially independent in 7-15 years. Over time, this could free up up to €0.51 billion per year.
- Replace equity financing from the accelerator's balance sheet with other sources whose mission is investment, rather than innovation. For example, the EIC could be merged with the European Investment Fund (EIF, which does not depend on EU budgetary resources) or with the proposed Sovereignty Fund. This would free up 0.41 billion euros per year.
- Use the resulting €0.92 billion for grants to increase the budget of ARPA-type programs, through Pathfinder and Transition.
- Pool part of the Pillar II cluster resources and part of the Innovation Fund to finance Pathfinder-type programs (or create two thematic agencies for energy and health, with the same reformed ARPA-style governance as 'EIC).
Panel (b) of Figure 10 depicts Horizon Europe after the reform. The dark coloring of the new EIC represents ARPA-type governance, extending to two new agencies across the dark bands. These are Pathfinder/Transition E and Pathfinder/Transition-H.
Pathfinder/Transition-E would focus on energy, climate and transport issues and pool resources from Pillar II Cluster 5 and the Innovation Fund. The Innovation Fund has a much larger budget than that of the EIC, so dedicating only a small part, for example 10-20%, of its budget to innovative innovation would free up resources equivalent to those currently available for EIC.
Pathfinder/Transition-H would address health issues and pool Pillar II Cluster 1 resources.56 Resources from the original, “general,” Pathfinder and Transition programs could also be used to fund the new agencies.
More generally, we argue that through the EIC, the ARPA-style governance model could be extended to other components of the EU innovation landscape. A natural candidate is the European Defense Fund, which represents a long-awaited effort to promote cooperation in defense-related R&D. Currently, the Fund dedicates only 4-8% of its budget to disruptive innovation.
The amounts available for promoting disruptive innovation are very small in the EU. It is therefore important to find a solution to bring more funds for this purpose. However, it is also interesting to note that we could get “more bang for our buck”.
Our proposed reform is therefore neutral for the EU budget (with the exception of lower costs for hiring program managers).
Approximately €400 million would be needed to finance holdings that currently use up to 60% of the EIC acceleration program. The purchase of shares in startups represents a financial operation that does not have to be financed with budget resources. Alternative financing could come from an EU sovereign wealth fund or the existing European Investment Fund – part of the European Investment Bank Group – whose mandate could be expanded to take on the accelerator program's holdings in its portfolio.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/eu-innovation-policy-conclusioni/ on Thu, 18 Apr 2024 05:52:03 +0000.