Innovation: A Dutch European perspective

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Innovation A Dutch European perspective

• Luc Soete
• University of Maastricht
• MERIT
• http//www.merit.unimaas.nl
• Washington, January 27th-28th, 2003

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Outline

• Leave it to my colleague Dominique Foray to
  describe in detail impact of digital technologies
  on process of innovation just a couple of
  remarks
• Focus here rather on knowledge gap between US and
  Europe also a reflection of the lower diffusion
  of ICT in Europe
• Four issues
• EU-US gap in private RD
• mismatch public-private research
• human capital gap
• innovation gap

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Impact of ICT on knowledge production

• Increase in productivity of RD thanks to the
  increase in the codification of knowledge and of
  digital communication between researchers
• Increase in spreading and diffusion of knowledge
  thanks to digital transparency
• Increase in rate of return to learning thanks
  to digital education forms, distant learning,
  versioning

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Impact of ICT on knowledge productivity

• IT (I factor equivalent to increase/speed in data
  manipulation, embodied in machines/instruments)
  increases the social rate of return to research
  and development, but private rate depends on
  appropriation and its limits
• CT (C factor aspect of access, networking)
  increases possibilities for catching up but
  depends crucially op open access, know-who,
  barter exchange of knowledge
• ICT increases social and private rate of return
  to learning (formal and informal education,
  training)

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1. The emerging knowledge and efficiency gap
between EU and US

• A long term perspective lagging behind, catching
  up and again lagging behind in private RD
• Reflected in the shift in the relationship with
  productivity growth between the 60s and 90s
• EU-US Business Enterprise RD gap has grown
  rapidly over 90s
• Concentrated in ICT sectors and biotechnology

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Figure 1 Business Financed RD as a of Value
Added
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Figure 2a Relationship between BERD (1967) and
productivity growth (1967-1972)
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Figure 2b Relationship between BERD (1995) and
productivity growth (1995-2000)
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Figure 3a Trend in the BERD GAP between EU and US
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Figure 3b Trend in the BERD gap by sector
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Diagnosis

• Dutch insights
• Fragmented RD in the 70s across EU countries,
  strongly linked to national champions efforts
• Specialisation across the EU of business RD
  during 80s/90s. Impact of 1992 Single Market on
  rationalisation of RD of large MNCs
• Attraction of US in the late 90s a new
  phenomenon concentration of RD worldwide.
• Efficiency of outside links of RD activities as
  important as internal ones. Hence interest of
  firms to locate their RD labs in best local
  conditions

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2. The growing mismatch between public and
private knowledge

• No significant gap in public research between EU
  and US at least until 2000
• Phenomenon of Dutch knowledge disease
• Improving quality and strengthening research
  capacities, but no specialisation. Trend towards
  national research autarchy
• Duality between internationalisation of private
  RD as opposed to nationalisation of public RD.
  Growing mismatch
• Similar trends in the rest of Europe? Hence
  strong need for ERA not just of public
  research, but of public-private research
  interaction

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Figure 3c Trend in the gap in public RD
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Figure 4 Trend in public, inclusive higher
education, RD
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(No Transcript)
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3. A Human Knowledge Gap

• Significant gap between EU and US in employment
  of SE in Business sector
• Ageing of European SE from teachers down to
  professors and SE researchers
• Renewal rate of human capital in Europe low,
  immigration levels low, emigration high in those
  countries with low levels of private BERD
• Need for a reformulation of Barcelona and ERA?

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Figure 6 SE as of labour force (growth rates
1995-2000)
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Figure 7 ST graduates by EU member country
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4. The Innovation Gap

• In the end it is the innovation gap which is most
  important many factors play a role
• Patent costs in EU compared to US
• Capital costs
• The Lisbon consensus the most dynamic and
  competitive region in the world, while
  maintaining/activating Europes social model
• Has the real question been asked link between
  innovation and risk taking and labour market
  security, in particular hiring and firing?

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Figure 8 Patent costs in EU, US and Japan
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American firms grow faster
Creation of EU and US firms among the World top
1,000
Since 1980
1950 - 1979
Before 1950
EU
USA
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Smaller firms need RD
Annual growth of GDP 1991- 2000 ()
Proportion of innovative firms doing RD ()
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Figure 9 Regulatory barriers index (OECD)