Innovation performance of European regions
Europe’s future lies in its power to innovate. Fully aware of the fact that innovation is central to economic growth and business competitiveness, the EU has placed it at the heart of its Europe 2020 strategy.
In order to provide an annual comparative assessment of innovation performance of EU Member States, the European Commission developed an instrument called the European Innovation Scoreboard in 2000, renaming it to the Innovation Union Scoreboard in 2011. As the regions of EU have begun to define and implement smart specialisation strategies, it can be interesting to take a look at the innovation scoreboard performance report.
Ever since its inception, the scoreboard has been one of the most important European studies of national and regional innovation performance. Its results are widely used by local and national governments in policy and decision-making.
Overall the European Union maintains a clear lead in innovation performance over the emerging economies of China, Brazil, India, Russia, and South Africa, but there remains a wide gap to global innovation leaders such as the United States, Japan and South Korea.
We in Bearing are pleased to notice that the European regions where we work extensively with regional development are doing well in the regional rankings. The most innovative countries in Europe, the ones with the highest percentage of regions being Innovative Leaders, are Germany, Denmark, Finland and Sweden.
- Innovation leaders: Sweden, Denmark, Germany and Finland.
- Innovation followers: Belgium, the UK, Netherlands, Austria, Luxembourg, Ireland, France, Slovenia, Cyprus and Estonia with a performance close to that of the EU27 average.
- Moderate innovators: Italy, Portugal, Czech Republic, Spain, Hungary, Greece, Malta, Slovakia and Poland perform below the EU27 average.
- Modest innovators: Romania, Lithuania, Bulgaria and Latvia are well below the EU27 average.
The measurement model
The measurement framework used in the Innovation Union Scoreboard distinguishes between 3 main types of indicators and 8 innovation dimensions, capturing in total 25 different indicators.
The first measurement type are ‘the Enablers’, which capture the main drivers of innovation performance external to the firms and cover 3 innovation dimensions:
Open, excellent and attractive research systems
Finance and support
Internal in business companies, ‘Firm activities’ captures the innovation efforts at the level of the firm, grouped in 3 innovation dimensions:
Linkages and entrepreneurship
The third type, ‘Outputs’ covers the effects of firms’ innovation activities in 2 innovation dimensions:
Below is a graph of all the factors in the measurement model. Click on the graph to see a larger version.
European Union regions by performance
The 2012 report was the first report to make a distinction between regions that are Innovation Leaders and Innovation Followers and this was also prominent in the 2013 report.
One of the most significant findings is that the performance of regions in regard to innovation is not bound to national borders of the member states, but was much more focused on specific areas within those nations. This is due to the fact that many countries have been developing national place-based policies such as the “Peaks in the Delta” policy in the Netherlands in which three regions, Mainport (Rotterdam-The Hague), Airport (Amsterdam) and Brainport (Eindhoven), have been the country’s core for innovation.
Regional performance groups
Source: Innovation Union Scoreboard 2013
Based on their average innovation performance the European union countries are put into four performance groups:
‘Innovation leaders’- countries whose performance is well above that of the EU27 average
‘Innovation followers’- countries whose performance is above or close to that of the EU27 average
‘Moderate innovators’- countries whose performance is below that of the EU27 average
‘Modest innovators’- countries whose performance is well below that of the EU27 average
Key strengths of innovation leaders are business activity and higher education sector, as well as balanced national research and innovation systems. In 2012 countries with these key strengths included Sweden, Denmark, Germany and Finland. Besides confirming the innovation leadership of these four countries, 2013 report has showed that the gap between ‘Innovation leaders’ and ‘Innovation followers’ is growing- less innovative countries as a group are no longer catching-up with the most innovative countries.
Innovation performance over time
Overall innovation performance ranking in 2013 remains relatively stable compared to previous IUS editions, even though there are several upward and downward movements inside each of the performance groups. Sweden has confirmed its EU innovation leadership for the third time in a row, followed by Germany that switched ranks with Denmark, and Finland. The Netherlands became the top innovation follower, while Italy remained the top innovator in the moderate performance group. The bottom end of the ranking belongs to Romania and Bulgaria both being outperformed by Latvia that occupied the last position a year ago.
Two member states have changed the performance group in 2013. Lithuania advanced to the ‘Moderate innovators’, while Poland moved down becoming a ‘Modest innovator’.
EU Member States innovation performance
Source: Innovation Union Scoreboard 2013
Besides provision of EU27 Member States innovation performance, the Innovation Union Scoreboard 2013 reports on innovation trends in Croatia, Iceland, the Former Yugoslav Republic of Macedonia, Norway, Serbia, Switzerland and Turkey. It also includes comparisons between the EU27 and 10 global competitors.
This year’s Innovation Union Scoreboard shows the US, Japan and South Korea’s performance lead over the EU27, with South Korea joining the US as most innovative country. The EU27 continues to have a performance lead over Australia, Canada and the BRICS countries.
Overall, the Innovation Union Scoreboard is yet another tool that show the correlation between innovation and consequential economic growth, and that this depends on development of local and regional know-how, competitive advantages that rival regions cannot match.
In the words of Michael Porter: “An economic geography characterized by specialization and dispersion- that is, a number of metropolitan areas, each specializing in an array of clusters- appears to be a far more productive industrial organization than one based on one or two huge, diversified cities. In nations such as Germany, Italy, Switzerland, and the United States, this kind of internal specialization and trade- and internal competition among locations fuels productivity growth and hones the ability of companies to compete effectively in the global arena.”
The 2013 study concludes with four lessons from a decade of innovation policy:
Countries should be encouraged to develop their own specific policy models – Five policy mix groups have been identified and the groups sometimes include countries with very different innovation performance. Policies do not necessarily respond to country specific challenges and could be made more effective with some degree of reorientation. The promotion of “best practises” across Europe with sometimes little consideration for the national conditions should be avoided or, at least, the measures should be carefully customized beforehand.
Funding remains concentrated on science and technological research – There is a trend to implement thematic programmes, to introduce more competition in the access to RDI support and to work on non-technological innovations but altogether funding is still targeted at science institutions and technologies.
Innovation policies to foster industry-science collaboration seem to be effective – There is a positive correlation between funding devoted to foster industry-science linkages and overall performance in terms of “industry-science collaboration”. However such collaboration first requires building RDI capacities both in universities and businesses; otherwise supporting collaborative approaches may be premature. This might the case for instance in modest or moderate innovators where capacities are often weak. Efforts should rather be put on directly upgrading their respective capacities, instead of aiming at collaboration in the first place.
Mixed impact of grants to support business innovation – The analysis tends to indicate that grants are less effective than loans and other financial instruments, or than support to start-ups or venture capital to raise the innovation performance of SMEs. However it cannot draw any strong conclusion in this respect.