Plenary session 2 conclusions: Research and Innovation in times of crisis
November 5, 2009The issue and context:
The ongoing financial crisis has had and will have considerable repercussions for European industry. Evidence indicates that investment in research and innovation by the private sector is seriously affected.
Six panellists from industry will participate in this plenary session discussion which will be led by Javier Vallés, the Spanish Lisbon Coordinator and Head of the Economic Bureau of the Spanish Prime Minister. The panellists will present the ways in which the crisis influences the level and orientation of their companies’ R&D activities and potential policy responses, with reference to the following questions:
- How have companies’ R&D and innovation (RDI) strategies changed since the end of 2008?
- What are the main factors influencing the decision to adjust RDI strategies (i.e. outsourcing, location, etc.)?
- Which policy measures are appropriate to address these factors?
- How can shorter term actions be reconciled with longer term goals?
A moderator will summarise these contributions with a view to the further development of European research policy.
Analysis of the challenges and European dimension:
We have heard that, in spite of severe consequences of the economic turndown, industry is not cutting down their investment in research and development. But that is not easy. Risk capital is hardly available and this affects companies in all stages of growth. Developing solutions for today’s and tomorrows societal challenges offer a way out of the crisis. The speakers call for the public authorities to pool resources to address these challenges and to develop programmes that are application-oriented, quick and significant. Keeping a skilled work staff by educating employees and attracting new talents is key.
None of this makes sense without a European home market with legislative and procurement practices that facilitate more research and innovation to be converted into successful products and services. The markets in which companies operate are more and more regulated (e.g. energy, health, housing). It is as important to make sure that legislation does not lead us away from an internal market and turns into a barrier for innovation.
Conclusions/Recommendations:
Mentioned were the following funding-related proposals:
- FP: adapting FP7 consortium requirements (?), specific grants to fund high risk research, demonstration projects to prove viability of new technologies
- Risk capital: reduce risk aversion to R&D projects by the EIB, develop a short term investment tool to increase risk capital for VCs, reducing covenants for their loans (?)
- Other: fully use of EU State Aid regulations (promoting the Young Innovative Company (YIC) tax status); set up professional assistance for SMEs/YIC, facilitating access to capital markets; government as a lead LP to catalyze private investment; keep/increase tax incentives for long-term entrepreneurship.
Examples of framework conditions that should be addressed are:
- ncertainty about the future energy-efficiency performance targets for buildings is preventing the building sector to invest in more buildings.
- The Directive on Alternative Investment Fund Managers (AFIM), currently being discussed in the EU institutions poses a direct threat to the creation of new venture capital funds. The minimal capital requirement for AFIM (currently 125.000 euro) and the provision that only AIFM established in Europe can provide their services in the Community, will prevent any new funds to be launched in the EU.
- The dossier protection and patent life of innovative drugs for rare diseases are too short to cover for the R&D investment.
- Trade tariffs for Brazilian bio-ethanol prevent the European renewable resources market from growing significantly.
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