European Innovation Scoreboard: Base Findings

The EU innovation gap with the US and Japan

The US and Japan are still ahead of the EU25 as shown in Figure 6, but the innovation gap between the EU25 and Japan, and in particular with the US is decreasing.

An analysis by innovation category shows that Europe is lagging behind the US and Japan with regard to innovation drivers, knowledge creation and intellectual property. For the remaining two innovation categories (i.e. innovation & entrepreneurship and applications) the available evidence does not allow to draw any inference.
A more detailed look at the five innovation groups highlights some peculiar differences between Europe and its competitors. Europe is ahead in the following areas (cf. also Figure 7):

• New graduates in science and engineering are 13‰ of population aged 20-29 in Europe and in Japan (2004 data), but only 10‰ in US (2004 data).
• In Europe and Japan, employment in manufacturing industries that produce medium/high and high-tech goods (7% of total workforce in 2003) is almost twice than that in the US (4% in 2003). A negative signal for Europe is that this indicator has declined by a few decimal points in 2005.
• European trading companies (101 trademarks per million population in 2005) have obtained a much larger number of new Community Trademarks than US companies (34 trademarks in 2005) and Japanese companies (only 12 trademarks in 2005). These figures reflect the fact that Community trademarks are intended to facilitate trade activities in the Member States of the European Union.
• The number of Community designs is also very high in Europe (111 new designs per million population in 2005) with respect to US and Japan (18 and 13 new designs, respectively, in 2005). These results are also consequential to the fact that Community designs are intended to facilitate the protection of the outward appearance of products that are sold in the European market.
  
  

On the other hand, Europe is lagging behind its competitors in a number of important aspects:

• In 2004, the expenditure of Japanese business in R&D (2.4% of GDP) amounted to twice the expenditures in Europe (1.2% of GDP). In the United States such expenditures settled to 1.9% of GDP.
• ICT expenditure in 2005 (6.7% of GDP in US, 7.6% in Japan, and only 6.4% in Europe).
• Broadband penetration rates for 2005 were 11% for EU25 and almost 15% for the US, whilst Japan was above 16%. The range for European countries varies from 1% to 22%.
• In 2003, the population with tertiary education was 38% in the US and 37% in Japan, whilst – in 2005 – it was still only 23% in Europe. The figures for the Scandinavian countries are around 30%.
• In the United States, venture capital investments at the early stage of activity of a company in 2002 (0.072% of GDP) were more than three times larger than the investments in Europe in 2005 (0.023% of GDP). No data are available for Japan.
• In 2004, 26.8% of total exports of goods in US was in high-tech products, 22.4% in Japan, and only 18.4% in Europe;
• The patents granted by the US patent office and the triadic patent families (those for which there is evidence of patenting activity in all blocks, i.e. EPO, USPTO and JPO), are a hegemony of the US and Japan. The number of patent applications filed at the European patent office (for which Europe as a home advantage) is again slightly in favour of our competitors (data of 2003).

Some indicators show a remarkable trend, although the innovation performance of Europe is evolving quite slowly. In the group innovation drivers, the indicator of broadband penetration rate has increased its score by 60% since 2004, going from 6.5 to 10.6 broadband lines per 100 population in 2005. Three indicators in the group of intellectual property have also increased significantly. These are:

• New applications to the European patent office, which have shown an annual average growth rate of 3.7% (increasing from 114 per million population in 1998, to 137 in 2003);
• New Community trademarks, which have had an annual average growth rate of 11%, increasing from 66 to 101 new trademarks per million population between 2001 and 2005;
• New Community designs, which have shown an annual average growth rate of 18% from 2003 to 2005, increasing from 79.6 to 110.9 new designs per million population.

On the other hand, the most worrying points relate to early stage venture capital (in the group innovation & entrepreneurship) and new-to-firms sales (in the group applications): both indicators halved their performance from 2000 to 2004 and show a critical average level for EU25.
Determining the common drivers of the European innovation process is not a univocal process; in fact, the innovation patterns depend strongly on a heterogeneous mix of variables. The 2006 EIS Innovation Strengths and Weaknesses report1 provides additional details on levels and trends at country level.

1 The 2006 EIS Innovation Strengths and Weaknesses report is available at: http://trendchart.cordis.lu/scoreboards/scoreboard2006/scoreboard_papers.cfm