Can Swiss show EU how to 'unleash' private sector R&D funding?

October 6, 2004

Brussels, 05 Oct 2004

According to Achilleas Mitsos, Director-General of the Commission's Research DG, if businesses are in the business of making money, then 'we must assume that the fact that they are not investing in research and development is the rational choice.'

Mr Mitsos, together with two other guest speakers, was taking part in a 'café crossfire' debate with the title 'how to unleash private sector R&D [research and development] funding?', organised by the think-tank Friends of Europe. Under its Barcelona objective, the EU aims to increase funding for R&D to three per cent of GDP by 2010, with two thirds of that sum coming from the private sector.

Currently, however, the EU invests roughly 1.9 per cent of its GDP in research, and only around 56 per cent of that comes from business. 'This really is a huge problem - it means we have to double private R&D funding in the next five years,' explained Mr Mitsos.

In Switzerland, by contrast, 69 per cent of research funds come from private sources, and with the Swiss Mission to the EU and the Swiss Science Agency both represented at the debate, it was hoped that some lessons could be learned from what the Swiss Ambassador to the EU, Dante Martinelli, called the 'very fruitful partnership' between the public and private sectors in his country.

For Jane Royston, professor of entrepreneurship and innovation at the Swiss Federal Institute of Technology, Switzerland is the most innovative country in the world, according to indicators such as Nobel Laureates or patents per capita. As to why this might be the case, Professor Royston pointed to the Swiss ability to transform dying industries into modern ones, for instance when mechanical watch making businesses crossed over into the production of miniaturised space technologies. She also highlighted the closeness of the political and economic elite in Switzerland to technology - in her opinion one of the hallmarks of an innovative society.

According to Mr Mitsos, however, while it is all fine and good to talk about the lack of an innovative culture 'we shouldn't try to develop it to the detriment of public function elements in Europe.' He believes that the main reason why European businesses are failing to invest in R&D is due to a lack of public intervention, state aid for research and fiscal incentives: 'Why can't we realise in Europe that research should be taxed less?' he asked.

Mr Mitsos stressed that while the lack of private investment in research is often described as a 'European problem', this does not necessarily mean that the European Union can change the situation. 'Many points are in the hands of national governments, and if governments don't take action immediately I don't think the private sector can be encouraged to invest in research.'

The Director-General continued: 'Having the Commission proposing common fiscal rules for research is just not possible - some Member States simply wouldn't even consider it.' However there are ways in which the EU can make a contribution, said to Mr Mitsos, for example through the Community approach in the area of state aid, the establishment of industry led technology platforms, and the open method of coordination.

Pan Miloslav Ransdorf is the vice chair of the Parliament's Industry, Research and Energy (ITRE) Committee, and he agrees that there are practical ways in order to encourage private firms to invest in research: 'It's important to provide tax breaks for companies that are improving their technology and creating jobs.' Mr Ransdorf also feels that it will be necessary for multiple universities to combine their efforts and adopt a more multi sectoral approach to research if they are to meet industry requirements.

'There is no miracle solution,' concluded Professor Royston. Mr Mitsos, however, ended by underlining that large European companies such as Siemens are investing in research - they are just choosing to do so outside the EU. 'We mustn't provide an alibi to the public sector - this must be due to a lack of incentives.'

CORDIS RTD-NEWS / © European Communities

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