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After controlling for GDP, businesses in the European Union were investing 57 percent as much in research and development (R&D) as their U.S. counterparts as of 2013. This should be of great concern to EU member countries since the bloc’s public investment in R&D was similar to that of the United States—just under 1 percent of GDP. Simply put, European businesses haven’t been doing enough to spur innovation in the region’s economy.
A successful innovation ecosystem requires robust investment from both public institutions and private industry. Bruegel, a Brussels-based economic policy think tank, has examined key measures of the region’s innovation capacity and found that the gap between the EU and United States reflects “a growing innovation-performance divide” between EU member states themselves. Bruegel finds that compared to EU’s innovation leaders (Denmark, Finland, Germany, and Sweden), other EU countries invest between 20 percent and 70 percent less in business R&D.