Brussels, 21 January 2002
The European Commission has published a report, 'Innovation, technology and risk capital,' which claims the reason for the success of the ICT (information and communications technologies) industry in the USA is the interplay between innovation, technology and risk capital, and argues this is lacking in Europe.
The Commission hopes that by examining the reasons behind the US success story, the EU will be able to boost its own performance and close the gap between Europe and the USA. 'A better understanding of the drivers of the US experience is vital to the EU because it might instruct where and how to focus future investigations, if the US performance could be 'replicated' in Europe,' writes US researcher and author of the report, Professor Dan Steinbock. Professor Steinbock is currently a visiting virtual researcher at the Helsinki school of economics and business administration (HSEBA).
'The evidence indicates that, between 1995 and 2000, the United States enjoyed a crucial advantage, through the dynamic interplay of innovation, technology and risk capital. Coupled with efficient capital allocation systems, this systemic interplay contributed to the superior US economic performance,' states the report.
The report goes on to say that during the same period, the EU enjoyed more risk capital, was ahead of the USA in Internet technologies and possessed comparable innovation capabilities along with a possibly superior infrastructure. Europe's weakness lay, however, in its failure to exploit fully the dynamic interplay of innovation, technology and risk capital, which are affirmed through rapid commercialisation, entrepreneurship and early seed funding. Furthermore, the USA benefited during this period from deregulation and liberalisation, including more flexible labour markets.
The paper highlights the strategic goal announced at the Lisbon Council in March 2000 for Europe to become the most competitive and dynamic knowledge based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion, and states that this is 'quite identical to the one inherent in the US system of innovation.' The environment in which the EU is attempting to achieve this goal is still very different to that of the USA, claims Professor Steinbock, citing a lack of both flexible adjustment among specialist producers and open labour markets as evidence.
Highlighting Europe's failure to commercialise discoveries, Professor Steinbock points to the development of the Internet, which first began at CERN, the European laboratory for particle physics. The US marketplace, however, commercialised the ideas, building on the innovations, exploiting the technologies and garnering the requisite venture capital. Although innovation, technology and risk capital were all available in Europe, the interplay of these elements was not, writes Professor Steinbock.
Professor Steinbock emphasises that there is no single innovation success model. 'All models entail trade-offs and compromises because of different political, economic, and social evolutionary trajectories,' he writes.
To access the full report, please consult the following web address:
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