27-03-07

R&D in Europe is not healthy

R&D paradigm shifting

An ongoing debate in Europe concerns the creation of the European Institute of Technology (EIT).

The EIT, a consolidated mega research center that would house both academic and industry projects, keep talent in the EU, and unite researchers in the 27 member states under the EU flag, may well end up being a reality in Brussels. Yet the EIT proposal from the European Commission continues to go through revisions, and the concept has many critics. All of this points to a bigger issue: Europe is headed toward an R&D crisis.

Europe has long been second in annual R&D spending to the leader, the United States, and in some sectors has fallen behind third-place Japan. Now Europe is facing new and strong forces in Asia when it comes to R&D.

According to a 2006 study on global R&D by the Battelle Memorial Institute, China has increased R&D spending annually about 17% over a 12-year period, compared to 4% to 5% for Europe and the United States. As China and India pour money into R&D, offer their cheap skilled labor, and grow their vibrant economies, both countries could move into the top tier of R&D spenders worldwide.

Moreover, R&D investment in Asia is accelerating. The Battelle report surveyed global businesses and asked if the companies planned to increase R&D in Europe in 2007. About 28% said yes, and 48% said no. When asked if they planned to increase R&D in Asia, the response was 65% yes, and 10% no.

"Now we recognize that China and India are challenging us, and that's the main reason this discussion has become much more intensive," says Esko Aho, former prime minister of Finland, who last year released an influential report on innovation in Europe.

"Europe is moving too slowly, and this can lead to a crisis when we are hit by a demographic revolution and its consequences."

At first glance, an R&D crisis seems strange. Europe has many world-class research institutes: IMEC in Belgium, Fraunhofer in Germany, and VTT in Finland, to name only a few. Livio Baldi, director of R&D cooperative programs for STMicroelectronics, calls it the European paradox: lots of world-class research pockets but a poor track record of commercializing the results.

"Europe has a lot of publications but very few patents and startups," he says.

Part of the problem is fragmentation. Pockets of research are not linked to a central hub, something the EIT is intended to resolve. Another issue has been talk instead of action. Europe's "Lisbon Strategy," a grand development plan launched in 2000, promised to reshape the EU into the "most competitive and dynamic knowledge-based economy in the world" by 2010. Targets for increasing R&D spending in member states were set but not met.

At a deeper level, cultural issues are to blame. Europe's risk-averse culture limits entrepreneurial drive, and organizational structures work to lock people in their place.

"We have no tradition of people moving from academia to government to business and back," Aho says. "Innovation required that type of mobility."

Aho says he believes that the proposed EIT could be a small part of a more comprehensive solution. Among the recommendations in his report was fundamental cultural change that would encourage mobility and promote more entrepreneurial risk taking.

Jules Duga, coauthor of the Battelle report, says that what is happening in Europe is merely early signs of a gradual but enormous rearrangement in global technology dominance due to the rise of Asian giants.

"Countries will have to determine their strengths, rearrange resources, and adjust over a period of time to a changing position in R&D on a global basis," Duga says. "Expect a shift in the overall R&D paradigm."

Source: Battelle Memorial Institute and R&D Magazine’s 2007 Global R&D Report

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