European Policy Analysis Group publishes report on European innovation policy

The European Policy Analysis Group has published a report 'EU Innovation Policy: How to escape the middle technology trap'.

The report argues that the EU is losing the global innovation race. EU industry invests less than its peers in R&D, it lags way behind in software and artificial intelligence, and its pharmaceutical component is at risk. For over 20 years the same companies, mostly from the automotive sector, have dominated EU innovation activity. The European Policy Analysis Group calls this "the middle technology trap", pointing out that they regard existing EU programmes to foster innovation, including those under the heading of the European Innovation Council (EIC) as being "far from the gold standard – the US Advanced Research Projects Agency (ARPA) model". Their decision processes are still very political, they impose collaboration instead of accompanying them, they devote too much of their limited resources to venture capital investment rather than to supporting breakthrough innovation, and the few project managers are over-stretched, the report says. The experts therefore suggest an ARPA-style model of governance and a budget-neutral shift of resources to support high-risk, high-return projects that are far from commercial application. Project selection and management should be improved by increasing the scientific and engineering excellence of the EIC Board and by delegating more to scientists. The current venture capital activities should be outsourced to a specialised fund.

In a nutshell, the report, published on 17 April 2024, says that "through its missions and governance, Horizon Europe does not meet the innovation challenge and anchors our industry in the mid-tech range. This report argues that current European efforts, while laudable, are insufficient, in both quantity and quality. Important reforms are required to enable Europe to compete in the value-creating space."

European Policy Analysis Group: 'EU Innovation Policy: How to escape the middle technology trap'