Research and technological development (RTD) can contribute to renewing growth, strengthening competitiveness and boosting employment in the Community. However, in order to achieve this a series of conditions must be satisfied: an adequate level of funding; an appropriate range of research activities; and effective mechanisms for transferring the results.
As it is difficult to increase public spending, the Member States agree on the need to promote investment in RTD in the private sector especially and to increase the effectiveness of their RTD through cooperation between companies and with universities and research centres.
Where Community RTD is concerned, emphasis is placed on coordination of RTD conducted by the Community and the Member States, focusing on key areas, simplifying procedures, in particular to facilitate the access of SMEs to RTD, and especially improving the dissemination and application of RTD results, notably by promoting standardization.
Among the practical measures proposed, mention is made of tax incentives for RTD investments, the promotion of companies specializing in new technologies, and the launching of major RTD projects.
In the Commission's opinion, Europe's research and industrial base suffers from a series of weaknesses.
(a) Level of resources
The first of these weaknesses is financial. The Community invests proportionately less than its competitors in research and technological development. In 1991, for example, its total public, private, civil and military spending on RTD stood at some ECU 104 billion, compared with ECU 124 billion for the USA and ECU 77 billion for Japan. This was equivalent to an average of 2% of GDP in the Community, 2.8% in the USA and 3% in Japan or, in relation to population, ECU 302 per inhabitant in the Community, compared with ECU 493 in the USA and ECU 627 in Japan. However, there are big differences between the Member States with research spending accounting for 2.6% of GDP in Germany, for example, but only 0.7% in Greece and Portugal. Investment by businesses is particularly weak, as they fund only 52% of all research in Europe compared with 78% in Japan, for example.
The Community also has proportionately fewer researchers and engineers: 630 000 (4 out of every 1 000 of the working population) compared with 950 000 (8 per 1 000) in the USA and 450 000 (9 per 1 000) in Japan.
Figures like these are meaningless in absolute terms and must be treated with caution. The use made of the funds is more important than the amount spent. And more important than the absolute number of researchers are their qualifications, their ability to meet the needs of developing industries and the extent to which the capital they represent is utilized. Nevertheless, on the whole this lower investment in both financial and human terms gives cause for concern.
(b) Coordination of research
A second weakness is the lack of coordination at various levels of the research and technological development activities, programmes and strategies in Europe. First, there is the lack of coordination between the national research policies. The Community's research budget accounts for only 4% of research spending by the twelve Member States. Even adding the resources allocated to joint European RTD activities in other frameworks (e.g. under EUREKA, ESA, CERN, EMBL, etc.), the budget amounts to only 10% or so of the total. Despite the coordination called for by the existence of these activities and the need for the Member States to take them into account when defining their own policies, the national policies are still developed largely without reference to one another.
This lack of coordination is particularly marked between military and civil research activities in each Member State which are conducted within relatively self-contained institutional frameworks, between which bridges are only just beginning to be built. In some Member States military activities account for a large proportion of all research (44% in the United Kingdom, 37% in France and 17% in Spain).
One immediate consequence, which can vary in intensity from one sector to another but is generally relatively important, is the lack of coordination of business strategies too, not only with public research policies and with the activities of universities and public research centres in each Member State but also with the strategies of other European businesses.
(c) Application of research results
The greatest weakness of Europe's research base, however, is its comparatively limited capacity to convert scientific breakthroughs and technological achievements into industrial and commercial successes. In most major fields and disciplines, Europe is up to the highest standards in the world in terms, for example, of the number of publications by researchers and of references thereto. In certain fields heavily dependent on action by the public sector, such as telecommunications, transport or the aerospace industry, European firms can also point to indisputable technological successes. The European chemical and pharmaceuticals industries are in the forefront on world markets. However, in all other fields of advanced technology, with a few exceptions, European firms have failed to convert their scientific and technological achievements into products and competitiveness.
This weakness stems from a combination of factors: the still inadequate links between universities and businesses, despite the progress made on this point in most Member States; the lack of risk capital to help firms through the development phase and the reluctance of private-sector financiers to invest in activities if they consider the risks too great or the return too uncertain; insufficient account of RTD in business strategies and the lack of coordinated strategies between businesses, universities and the public authorities (compared with Japan, for example); the lack of facilities or the regulatory obstacles to business start-ups by researchers and the lack of mechanisms for harnessing the knowledge and technologies generated by defence research; the targeting on markets which are too small and the weak capacity to foresee future needs and demand on the market, etc.
(a) New directions for research
To restore the dynamic combination of technology, growth and employment, the Community and the Member States must take measures on several levels. These can be divided into two main groups. The first comprises measures aiming essentially at restoring the competitiveness of European businesses and renewing growth. One aspect will be to correct the traditional weaknesses of Europe's research and industrial base and to restore Community firms to the forefront of the world economy. The other will be to extend the geographical coverage and to take account of the new needs of society in the Community and throughout the world.
The effect of these measures to restore competitiveness on industrial activity in the Community will have a positive indirect impact on employment. Coordinated measures to take account of the new needs of society should in turn create a number of jobs. Alongside these measures, however, a second category of action should also be taken, targeted more specifically on improving the employment situation.
(i) Restoring competitiveness and renewing growth
To make European companies more competitive, action is needed on the three traditional weaknesses of Europe's scientific and industrial base. First, steps must be taken to allow better application of the results of the research carried out in the Community, i.e. the establishment of operational mechanisms at national and European level for the transfer of technologies from university laboratories to companies, from one company to another and from the military to civil research sectors. One key aspect must be substantially to step up the measures to improve the business environment, in the form of scientific and technical information, financial services, aid to protect innovations, training in new technologies, etc.
In this context, sufficient importance should be attached to small businesses. Small businesses working in high-technology sectors, producing capital goods and advanced consumer goods or applying advanced technologies in manufacturing industry represent a significant potential source of growth. In the USA, a very large proportion of emerging technologies were first developed by small firms which are better equipped to anticipate the needs of the market and to react rapidly.
Beyond the coordination already existing in practice today, measures should also be taken to further effective coordination of research activities, strategies and programmes in Europe. The first thing must be coordination between the national public research bodies: the coordination structures now being set up between most of the major national bodies should be strengthened and institutionalized. A forum for concertation and exchanges between the various European research bodies and centres could also be set up. To encourage the development of concerted strategies linked to the Community's activities, a science and technology assembly could also be established, based on the Commission's existing consultative committees.
Companies, particularly firms conducting large amounts of research, should also coordinate their strategies more closely in the framework of joint projects. Based on or alongside existing consortia, frameworks for inter-company cooperation should be established at Community level. These frameworks for close cooperation between potential users and makers of new products, component suppliers and manufacturers of the end-products would provide a means of deriving maximum benefit from the work carried out by companies' research departments and establishing consistent strategies, guided by earlier anticipation of the needs of the market. They could be planned in conjunction with definition and implementation of major projects bringing together rival European companies for work on carefully targeted technological objectives.
With regard to overall research funding, the objective of a gradual increase to 3% of GDP should be borne in mind. It is not a question of "more of the same research" but an increase in technological development ("bolt-on research"). In view of the current budgetary constraints in all European countries, companies should bear a larger share of the spending. Their objective should be to achieve investment levels comparable to those of their rivals by providing greater funding for in-house research and work in universities. Appropriate regulatory and tax measures should be taken to make it easier for the private sector to bear such a higher share of research spending.
(ii) New geographical markets and new needs of society
In addition to competition and market forces, considerable potential for growth lies in catering for a wider geographical area than the Triad alone and for the emerging needs of society. The newly industrialized countries in the Pacific region compete with the Community in basic and intermediate technologies and will soon be able to develop more sophisticated technologies themselves. For several years they will offer a window of opportunity for companies in the Community. Countries such as these which are keen to acquire advanced production technologies but also, by virtue of their explosive development, face serious environmental problems, offer large potential markets.
Both as a source of high-level scientific and technical know-how and as a market for specific technologies and advanced production processes, the countries of Central and Eastern Europe, which are not only geographically but also historically close to the Community, provide further rich potential for innovations which Eastern and Western Europeans should harness together, by pooling their complementary skills.
Accompanied by measures to create viable demand in the countries concerned, the establishment of truly effective mechanisms for transferring technologies to developing countries would also provide Europe with substantial potential markets for specific products and requirements.
One key aspect of this broadening of the horizons of the Community's research should be closer cooperation to implement very big programmes reflecting the biggest worldwide needs for the next century: energy, global change and food.
New needs which could make a significant contribution to restoring growth are apparent in three areas: the environment, health and media. The market in environmental products and services, for example, covers pollution detection and monitoring technologies, environmental improvement technologies, clean technologies (i.e. improvements to conventional technologies to take greater account of environmental requirements) and ecotechnologies (entirely new technologies based on novel raw materials and energy sources). Added to this market in goods, there is also the market in services such as water treatment, waste processing, etc. On the basis of the latest estimates, this world market in environmental products and services is worth some ECU 190 billion per year now and could reach ECU 270 billion by the year 2000.
The second area is health. Alongside new molecules to treat diseases of the nervous system and degenerative and viral illnesses not yet properly controlled, the principal market concerned is in advanced preventive technologies and methods allowing treatment in the home by the patients themselves or by non-specialist staff, automatic monitoring and diagnosis systems, remote monitoring, etc.
In the field of the media, one category heading for vigorous expansion is the range of multimedia products (CD-ROM, CD-I, CD-TV, etc.) and the corresponding hardware. With their impressive capacity to store enormous quantities of text, sound and moving and fixed images on the same medium, combined with the possibility of multiplying the effects by linking up with telecommunications systems, these products will revolutionize the media industries.
At the crossroads between satisfying the worldwide needs in the fields of energy, health and the environment and the requirements for competitiveness, biotechnology is one of the fields offering the greatest potential for innovation and a particularly rich source of growth. What is more, a significant proportion of the research and development work in this field is carried out by small and medium-sized businesses. However, in order to ensure development of activities in this field commensurate with the actual and potential needs, steps must be taken to establish an appropriate regulatory framework, to harmonize the measures taken in the various countries and to define a global strategy bringing together the public authorities, research bodies, businesses and the various sectors of society concerned.
Impact on employment
The measures described above to restore competitiveness and take account of the new needs of society should have a moderate, but indisputably positive indirect impact on employment. The rise of the environmental industries could possibly have a great impact on competitiveness and should have at least the same effect in terms of safeguarding existing jobs as the concept of quality did a few years ago. By contrast, there is undoubtedly potential to create jobs in the health and media sectors. The development of new formulae for care in the home based on decentralized assistance and health-care technologies will create a need for health-care, assistance and training staff. The new market in media products in addition to, rather than in place of, existing printed and audiovisual media should also generate a whole cascade of new jobs.
Of course, the measures to encourage business start-ups in high-technology sectors should in turn have a positive impact on employment. In the USA, firms of this type are often started up by researchers leaving universities or big businesses. The increase in the number of firms of this type should create a certain number of jobs for development engineers, administrative staff, etc. The same applies to the measures to increase the total number of researchers and engineers in the Community. Of course, the primary objective should be optimization of the available resources by adapting the skills of the existing scientific and technical staff to the new needs. However, the creation of new jobs for researchers and engineers as fast as Europe's scientific and industrial base can absorb them would be the most effective means of ensuring a net increase in the resources allocated to research activities.
The policies and programmes conducted by the Member States and the Community should also aim at promoting technologies which will save the maximum number of jobs or require or encourage the creation of new jobs as long as they have an equal effect on competitiveness and growth and an equal capacity to satisfy the current and foreseeable needs of society. Tools and methods must be devised to determine the net impact of a wide range of technologies on employment.
(b) Specific means
(i) Measures by the Member States
Since most of the spending on research and development in the Community is under the control of the Member States, most of the measures mentioned must be taken at national level. The provisions outlined should be put into practice in the national policies and programmes. In view of the current constraints on research budgets and to ensure the most effective action possible in cost/benefit terms, priority must be given to the indirect regulatory instruments under the control of the Member States.
In the context of transferring a higher proportion of research spending to the private sector and of shifting government intervention from direct support to indirect instruments, tax credit schemes for research could be developed to encourage companies to invest more in science, even in the long term. Special formulae could be devised to encourage companies to fund research by universities.
The Member States could also study and introduce schemes to lighten the social security contribution burden on firms and research bodies creating new jobs for researchers and engineers together with financial or career incentives for further on-the-job training for the scientific and technical staff in service. In addition to its impact on employment, action in this field could also promote the dissemination of knowledge and of new technologies. Within the existing schemes to help business start-ups, formulae could also be defined for helping researchers to start up businesses. Financial instruments under the direct or indirect control of the national authorities could be adjusted to provide companies, particularly small businesses, with the risk capital to develop the innovations which they have prepared.
(ii) Community measures and concerted action
The Community itself should also take measures to back up these activities. The broad lines of the Fourth (1994-98) Framework Programme currently being discussed already clearly point towards the establishment of mechanisms to coordinate the national efforts (research consortia) and industrial research policies (particularly in the form of support for Eureka projects), concentration on a limited number of key technologies with a major impact on many branches of industry, greater support for the dissemination of the results of the research carried out in the Community, establishment of a system of access to and participation in the programmes specifically for small and medium-sized businesses, etc.
In conjunction with the Fourth Framework Programme and the preparations about to be started for the next programme, new large-scale research projects should be defined in conjunction with the national research bodies and companies.
Implementation of the guidelines proposed will also call for changes in the rules and instruments for Community research. In practice, there are clearly limits to the single formula of 50% funding of the costs of pre-competitive research projects. Formulae creating a more flexible link between project-funding and the obligation to produce results, tailoring the level of public support to the economic and social importance of the results, will have to be explored. More practical formulae in terms of costs and benefits, such as low-interest loans repayable over very long periods, will have to be developed.
To facilitate the adoption of converging, proactive measures in the Member States, the possibility of agreeing guidelines at Community level on business start-ups, funding of the application of research results or changes in the conditions of employment for scientific staff will have to be studied. Steps will also have to be taken to ensure that the measures implemented are compatible with competition policy, notably on agreements and State aid. Finally, to maximize the impact of the measures taken at Community level and by the Member States, significant efforts will be required to make the Community's research, external relations and commercial policies more compatible.