What Works in Innovation Policy: Lessons From Europe

Policymakers across the world are looking for ways to foster innovation in their own countries. In particular, European countries have begun introducing national innovation policies or initiatives, many designed to boost competitiveness in advanced and emerging technology markets. On Tuesday, June 5, ITIF hosted an event on what the United States could learn from European countries about innovation.

The event, moderated by ITIF Vice President for Global Innovation Policy Stephen Ezell, included speakers from the European Union, Netherlands, United Kingdom, Austria, Germany, and Sweden. Each panelist shared his or her country’s methods of sparking innovation. The speakers suggested a general sense that European countries embrace the government’s involvement in innovation; several of the countries discussed devote considerable public spending to research and development (R&D). In addition, the speakers noted that international cooperation is a crucial factor in encouraging innovation.

According to Robin Mishra, Minister-Counselor of the Head of Section Science and Technology of the Embassy of the Federal Republic of Germany, the combination of both a strong industrial sector and reliable public R&D funding has helped foster Germany’s innovation economy. Germany invests 3% of its GDP into R&D, with one-third coming from the public sector. In fact, improving research is so important for the country that over the past 13 years, it has doubled its budget for the Federal Ministry of Education and Research to 17 billion euros.

In addition, the backbone of the German innovation movement is the mission-oriented initiative, High Tech Strategy. Overall, the goal of the initiative is to create an environment that is conducive to innovation, which includes public-private partnerships in many different areas. As part of this initiative, the federal and regional governments are funding different research organizations and universities to encourage “excellence.” Additionally, the government invests in higher education and encourages many of its young citizens to pursue apprenticeships. In the future, Mishra noted that Germany may encourage tax incentives for innovation and R&D and invest heavily into artificial intelligence (AI) research.

Andrew Price, Head of Science and Innovation at the British Embassy in Washington, D.C., believes the United Kingdom is successful at innovation because the economy is very service-based, policy support is relatively centralized, and there is widespread political support for the government’s role in innovation. In general, the United Kingdom has focused more on public R&D investments to support innovation than active government intervention; in fact, approximately 30 percent of R&D investment comes from the public sector. Looking to expand this, the British government committed to increase public R&D funding by $9 billion over the next five years and has made a pledge to spend 2.4 percent of its GDP on R&D eventually. However, he noted that the United Kingdom must address sharing innovation across the entire country, rather than just its urban hubs. As the United Kingdom leaves the EU, Price trusts that the strengths of the UK innovation system will remain in place as it renegotiates its relationships with other European countries.

Like Price, Sigrid Johannise, Counselor for Innovation, Technology and Science at the Netherlands Embassy in Washington, D.C., believes that international cooperation is key to developing effective innovation policy. Because of this belief, Dutch companies invest heavily—approximately $2 billion—into R&D in the United States. The Netherlands sees government as a tool to spark innovation. In fact, Johannise described Dutch innovation as a value chain, where innovation is reliant on different businesses and the government. In addition, the Netherlands is shifting its innovation focus to societal challenges, because these challenges will represent the business models of the future. In the country’s view, innovation will be necessary to confront issues like an aging population, climate change, and cyber security.

Clemens Mantl, Director of the Office of Science and Technology Austria, Washington, D.C., recognizes that although Austria is a relatively small country, it has made great progress in innovation. The Austrian government sets the direction for innovation and coordinates with other government advisory councils, industry groups, and civil society. Currently, the Austrian innovation strategy specifically encourages digitalization and international cooperation. As part of this, the government set aside funds to facilitate cooperation between universities and companies, including international ones. The government also supports pilot factories as testbeds for industry 4.0, since manufacturing is still a major component of the Austrian economy. Lastly, Austria has set goals to invest almost 4 percent of its GDP into R&D by 2020 and install a Chief Digitalization Officer in every Cabinet-level agency.

Maria Lonnberg, Science and Innovation Officer at the Swedish Embassy in Washington, D.C., spoke briefly about Sweden’s innovation approach. First, the country prioritizes innovation by investing over 3 percent of its GDP into R&D and by emphasizing innovation from the top, with the prime minister as head of the country’s National Innovation Council. According to Lonnberg, Sweden’s open-mindedness is a key component of its innovation, since its decision-makers are open to experiment with new ideas. In addition, the country actively tries to provide opportunities for all; for example, it provides daycare and educational opportunities, so all citizens can participate in the economy. The country’s safety net also plays a key role in Swedish innovation. Workers know that if the economy or industry changes drastically, the government would provide job re-trainings and other opportunities. This, overall, enables the people of Sweden to embrace the future.

Peter Fatelnig, Minister-Counsellor for Digital Economy Policies of the EU’s Delegation to the US, claimed that the EU’s system empowers member-states to come together and identify where cooperation on innovation is needed. The EU also provides a “tool box” that countries can use, with tools including the opportunities to create European institutions or to join in on a strategy to promote AI research. These tools enable smaller countries, like Austria and the Netherlands, to collaborate to create the best innovation policies.

Fatelnig also discussed European attitudes toward regulation. In his view, regulation does not always stifle innovation; rather, it can be a tool to spur innovation. For example, after the EU passed regulations on car emissions, European manufacturers developed cars that used less gasoline while maintaining powerful engines. In order to encourage effective regulations, the EU has committed to review every regulation for its innovation impact.

Overall, the European innovation model prioritizes cooperation between the public and private sectors, particularly when it comes to R&D spending. Europeans do not see government support as an all-or-nothing choice; instead, the right type of government involvement can support innovation. The panelists also emphasizes cooperation between different countries, since as Price said, “innovation is inherently an international endeavor.”

Follow the discussion on Twitter using the hashtag #ITIFinnovation.