Science, research and innovation performance of the EU 2018 Román ARJONA Strengthening Beñat BILBAO-OSORIO the foundations for Europe's's future DG Research & Innovation European Commission Madrid, 15 June 2018
2 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future Key messages Science and Innovation are crucial for economic and social ▪ prosperity Innovation and its impacts are changing due to ▪ digitalisation and other longer-term forces A new wave of innovation ahead of us. Digital meets ▪ physical. Large opportunities but also risks and uncertainty The fast pace of changes in innovation needs a renewed ▪ and strengthened science and innovation policy agenda
3 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future Changes in innovation dynamics are driven by long- term forces …
4 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future … that are changing the pace, nature and impacts of innovation ... ➢ Increased complexity ➢ Concentration of benefits in Superstar firms ➢ Very rapid innovation pace change
5 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future … increasing innovation divergence across firms, hindering innovation diffusion… The widening labour productivity gap between global frontier firms and other firms (1) Non-financial business services Manufacturing 0.5 0.5 Frontier firms Frontier (top 5% ) firms 0.4 0.4 (top 5% ) 0.3 0.3 0.2 0.2 Laggards 0.1 0.1 Laggards 0.0 0.0 -0.1 -0.1 2001 2003 2005 2007 2009 2011 2013 2001 2003 2005 2007 2009 2011 2013 Science, Research and Innovation performance of the EU 2018 Source: DG Research and Innovation - Unit for the Analysis and Monitoring of National Research and Innovation Policies Data: Andrews, Criscuolo and Gal, 2016 Note: (1) The global frontier is measured by the average of log labour productivity for the top 5% of companies with the highest productivity levels within each 2-digit industry. Laggards capture the average log productivity of all the other firms. Unweighted averages across 2-digit industries are shown for manufacturing and services, normalised to 0 in the starting year. The vertical axes represent log differences from the starting year: for instance, the frontier in manufacturing has a value of about 0.3 in the final year, which corresponds to approximately 30% higher in productivity in 2013 compared to 2001.
6 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future … and holding back productivity and economic growth … Total factor productivity - compound annual growth, 2007-2016 4 TFP - compound annual growth (%), 2007-2016 3.2 3 2 1.31.00.70.50.40.30.20.20.10.10.10.10.1 1 0.5 0.50.40.1 0.1 0 0.00.0-0.1 -0.1 -0.3 -0.4 -0.4 -0.6 -1 -0.8 -0.8 -1.0 -1.1 -1.3 -1.5 -2 -2.1 -3 Science, Research and Innovation performance of the EU 2018 Source: DG Research and Innovation - Unit for the Analysis and Monitoring of National Research and Innovation Policies Data: European Commission - DG Economic and Financial Affairs
7 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future …as productivity (TFP) is the crucial driver of long term economic growth Contribution to growth in GDP per capita, 2000-2060 (annual average) Capital Total factor productivity (TFP) Human capital Labour GDP 8 2020-2030 2000-2010 2010-2020 2030-2040 2040-2050 2050-2060 7 6 Percentage points 5 4 3 2 1 0 -1 OECD non- OECD non- OECD non- OECD non- OECD non- OECD non- OECD OECD OECD OECD OECD OECD G20 G20 G20 G20 G20 G20 Science, Research and Innovation performance of the EU 2018 Source: Braconier H, Nicoletti G and Westmore B, (2014), OECD Note: (1) The non-OECD G20 countries are Argentina, Brazil, China, India, Indonesia, Russian Federation, Saudi Arabia and South Africa.
8 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future R&I creates new and better jobs but can affect existing ones There is no overall job destruction in Europe, but labour markets are becoming polarised, putting pressure on wages and on inequality Job polarisation - percentage point change in employment shares by skill group, 2012-2014 10 7.2 8 5.4 6 3.4 4 3.0 Percentage points 2.7 1.0 2 0.9 0 0.1 0 -0.7 -2 -4 -4.5 -6 -8 -10 -8.9 -9.5 High Medium Medium Low High Medium Medium Low High Medium Medium Low skilled skilled - skilled - skilled skilled skilled - skilled - skilled skilled skilled - skilled - skilled non routine non routine non routine routine routine routine EU Japan United States Science, Research and Innovation performance of the EU 2018 Source: DG Research and Innovation - Unit for the Analysis and Monitoring of National Research and Innovation Policies Data: OECD estimates based on EU-LFS, Japanese Labour Force Survey, BLS Current Population Survey
9 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future Europe is a global public research and scientific powerhouse …
10 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future … but less so an innovation leader, including in some forward- looking technologies… New generation technologies - % share of IP5 (1) patent families filed at EPO and USPTO by type of ICT technology, 2005-2007 and 2010-2012 60 50 40 % 30 20 10 0 Quantum computing and telecommunication (2010-2012) Big data (2010-2012) Internet of things (IoT) (2010-2012) 2005-2007 Science, Research and Innovation performance of the EU 2018 Source: OECD Science, Technology and Industry Scoreboard 2015 Note: (1) The five IP offices (IP5) is a forum of the five largest intellectual property offices in the world (EPO, USPTO, JPO, SIPO, KIPO). They account for 90% of all patent applications filed worldwide.
11 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future … and drags behind in terms of supporting transformational entrepreneurship …
12 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future … while significant resources are locked -in in unproductive companies % share of capital sunk in zombie firms (1) , 2013 30 25 20 % 15 10 5 0 Science, Research and Innovation performance of the EU 2018 Source: DG Research and Innovation - Unit for the Analysis and Monitoring of National Research and Innovation Policies Data: OECD (Adalet McGowan, Andrews and Millot, 2017) Note: (1) Zombie firms are firms aged ≥10 years and with an interest coverage ratio<1 over three consecutive years. The sample excludes firms that are larger than 100 times the 99th percentile of the size distribution in terms of capital stock or number of employees.
13 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future …affecting Europe's bridging of the productivity gap in knowledge-intensive sectors Labour productivity (1) of manufacturing (MFG) and knowledge- intensive services (KIS) by type of sector - EU and the United States Labour productivity (1) in current PPS € 350000 300000 250000 200000 150000 100000 50000 0 United States (2) (2015) EU (2014) Science, Research and Innovation performance of the EU 2018 Source: DG Research and Innovation - Unit for the Analysis and Monitoring of National Research and Innovation Policies Data: Eurostat, OECD Notes: (1) Value added per person employed in current PPS€. (2) US: (i) Medium-low-tech MFG does not include repair and installation of machinery and equipment; (ii) High-tech KIS does not include scientific research and development and telecommunications (iii) Market and other KIS does not include employment activities. (3) Market and other KIS does not include investigation activities due to unavailability of data.
14 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future Low investment in intangible assets, such as business R&D…
15 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future …coupled with the need for better conditions for open science…
16 SCIENCE, RESEARCH AND INNOVATION PERFORMANCE OF THE EU 2018 Strengthening the foundations for Europe's future … open innovation… Public-private co-authored scientific publications per million population, 2008 and 2015 200 15 180 12 160 9 140 6 120 3 100 0 80 EL CY PT MT PL RO BG LT LV RS TR UA BA MK AL 60 40 20 0 2015 (1) 2008 Science, Research and Innovation performance of the EU 2018 Source: DG Research and Innovation - Unit for the Analysis and Monitoring of National Research and Innovation Policies Data: EIS 2016, CWTS based on Web of Science database (March 2017 data), Eurostat, OECD Note: (1) LV, AL: 2013; US, JP, CN, KR, IL, BA: 2014.
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