Bridging the Innovation Gap
The recent productivity report by Mario Draghi has sparked a crucial discussion about innovation dynamics between the EU and the US. With concerns that Europe might lag behind the US without massive public subsidies, it’s essential to delve deeper into this challenge.
Key Findings:
- The EU and the US invest equally in public R&D—each at 0.7% of GDP.
- The gap? Private R&D spending is notably higher in the US (2.3% vs. 1.2% of GDP in the EU).
- The US leads in high-tech sectors like pharma, biotech, software, and aerospace, fuelling a cycle of innovation.
What’s Driving the US Advantage?
The dynamic shift from traditional giants like Ford and Pfizer to digital pioneers like Alphabet and Microsoft signifies the accelerating pace of sectoral innovation in the US. Meanwhile, the EU remains anchored to automotive sector leaders.
Strategies for the EU:
1. **Digital Leadership**: Emulate Estonia’s digital government sophistication EU-wide. Bolster EU software with digital platforms and integration.
2. **Coordinated Policy**: Implement smarter, unified procurement policies and digital infrastructure such as transforming logistics with a digital euro.
3. **Support Start-ups**: Simplify regulatory frameworks to enable start-ups to thrive. An “EU Inc” model can create a fertile ground for scaling innovations.
NOTABLY. The EU doesn’t need more subsidies; it needs smarter strategies to cultivate a thriving ecosystem.
(The original article was published in the Financial Times here)