Helsinki, 16 October 2006

Communication from the Commission to the European Council (informal meeting in Lahti - Finland, 20 October 2006)
Brussels, xxx COM(2006) yyy final

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But perhaps the greatest challenge to our education systems is organisational. Europe's education system remains fragmented; universities do not co-operate with each other as much as they should. In the US and Japan, many successful innovations have emerged from close collaboration between academia and business. Europe has joined this game rather late and has a lot of catching up to do.

Another handicap to greater innovation is that Europe's R&D investments are much lower than those of other industrialised countries. If Member States' commitments are realised, Europe's R&D expenditure is expected to reach 2.6% of GDP by 20103, from the current level of 1.9%. But achieving this implies considerable efforts at both national and EU levels, notably to make Europe more attractive to R&D investment. The research investment deficit in Europe arises mainly from much lower R&D investments by the private sector, which in turn reflects less favourable framework conditions and a concern about profitability.

Finally, in many areas, there are still obstacles hindering economic dynamism. Many companies face access barriers in specific markets, scarcity of venture capital and bottlenecks in our regulatory framework or red tape which impede innovation and hinder the diffusion of ideas. In addition, outdated structures and customs make it more difficult to adapt to rapid change.

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III. THE KEYS TO UNLOCKING EUROPE'S INNOVATION POTENTIAL

While technological innovation is important, there is at least as much scope for nontechnological innovation, for example through changes in business models, better design and process organisation. In fact, organisational change is usually needed to get the best out of technological advances..

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Action in the following areas would significantly boost Europe's innovative capacity:

1) Establishing European leadership in future strategic technologies

To date, Europe continues to suffer from a dispersion of limited resources4. The European Technology Platforms (ETPs) are an excellent instrument for greater collaboration and the achievement of critical mass. They bring together a wide range of public and private stakeholders to define and implement long-term research and technology agendas. They address from an early stage the framework conditions for bringing results of R&D work successfully onto the market. A strong commitment from national and regional public authorities to help ETPs to realise their goals would boost their prospects of success.

Some ETPs have achieved such a scale and scope that achieving their key objectives now requires the setting up of dedicated public-private partnerships - i.e. the creation of "Joint Technology Initiatives" (JTIs) - which will lead to higher and more stable commitments for research investment over the longer term.

Promising areas where the launch of JTIs is envisaged:
- Hydrogen and Fuel Cells
- Nanoelectronics
- Innovative Medicines
- Embedded Computing Systems
- Aeronautics and air transport ("Clean Sky")
- Global Monitoring for Environment and Security (GMES)

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European industry stands ready to invest considerable sums of money in these initiatives provided their investments are matched by EU funding (through the 7th Framework Programme), complemented by individual Member States' contributions. Launching ambitious public-private partnerships on solid economic and governance foundations is an opportunity we cannot afford to miss if we want to establish European leadership in the technologies of tomorrow. The European Institute for Technology could build on initiatives in these and other promising fields.

The Commission will include, in its Progress Report on the Growth and Jobs Strategy due for the end of this year, a road map for the early launch of the most mature JTIs.

2) Forging much stronger links between universities, research and business

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In the past, universities would develop new knowledge and, when it was mature, it might be picked up by business for commercial application. Far too much knowledge remains locked up in universities and the development of new knowledge takes too little account of the needs of business. This innovation model is out of date. Today, innovation is build around knowledge networks which, by sharing, developing and accumulating knowledge, facilitate a rapid development of products and services out of new ideas.

Such cooperation between universities, large and small companies, research and knowledge transfer institutes, investors or even associations of users and consumers is best realised within clusters - geographically delimited areas which allow for a direct interaction between existing stakeholders and which also attract new ones. In fact, there is strong and growing evidence that companies co-operating in clusters are amongst the most innovative in Europe.

Cluster policy has therefore become an important element of Member States' innovation strategies and should be encouraged further.

Member States and universities can do much themselves- and are already doing - to foster closer co-operation. But significant benefits can be reaped if we manage better to exploit the knowledge and capabilities available across the EU. The proposal to create a European Institute of Technology (EIT) presents an innovative model for strong cooperation between universities, research centres and the business community. The EIT will contribute to improving the competitiveness base of the Member States by involving partner organisations in integrated innovation, research and education activities at the highest international standards. The EIT will help to pool Europe's resources, mobilise private sector funding for cutting edge research, attract the best researchers from all over the world, stimulate spin-offs of innovative SMEs, and in so doing could become a symbol of Europe's ability to work together and innovate.

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3) Improving the framework conditions

Turning knowledge into successful commercial applications does not depend on luck. Investing in R&D alone does not suffice. There are a number of general as well as sectorspecific framework conditions that, if present, significantly improve the environment for innovation and the chances to achieve commercial rewards. After having set a common target for R&D spending, Europe must now focus on getting the most out of this investment by creating the right framework conditions.

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