Funding Ideas, Not Companies

Abstract

Competitiveness has returned to the top of the EU agenda, with the EU Competitiveness Compass highlighting the need for innovation-driven growth. But European industry has fallen behind in innovation by specializing in mid-tech industries, now increasingly subject to Chinese competition.

Since the start of Horizon 2020, the EU budget has provided about €100 billion to support research and innovation. But this seems to have had little impact. A large proportion of Horizon funding has gone to a small number of big corporations with modest innovation and growth performance. Another sizable share goes to SMEs that are part of wider corporate groups.

Moreover, the lion’s share of Horizon funding has gone to collaborative programs, with detailed guidelines on research topics and expected outcomes, typically involving broadbased consortia with more than 20 participants. Yet our analysis suggests that bottomup programs undertaken by individual recipients yield better results, but only if the recipients are independent SMEs.

Any new Framework Program should thus focus on funding ideas, not companies. They key is not more money, but rather leaving space for disruptive innovation by encouraging bottom-up initiatives, especially by small independent companies.