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How to make the best out of EU research budgets? Commissioner Carlos Moedas suggests answers and proposes giving more money to innovators. But what does that mean for collaborative R&I? A VDMA analysis from Brussels.

By Kai Peters

 Carlos Moedas © European Union 2016The European Union is spending almost 80 billion euros - a huge amount of money - on the current Horizon 2020 research framework program between 2014 and 2020. These resources undoubtedly arouse the interest of universities, research institutes and industry - and of EU member states who see an opportunity to get some money back from Brussels. Mechanical engineering companies also regularly receive significant research funding from Brussels.

On the other side stands the EU Commissioner for Research and Innovation, Carlos Moedas, who has to stitch together the next R&I program by 2020. He needs to ensure that taxpayers' money is used wisely and that there is a visible return on investment for European citizens - no easy task, and often a very thankless one. 

Despite the difficult circumstances, the European Commission and its Research Commissioners have managed this difficult job well in the past and have succeeded in putting together relatively consistent strategies with added value for Europe. Research programs have always been a core element of the European Union and have enabled and fostered European cooperation in science and industry. The engineering sector - a technology integrator embedded in cross-border value chains - has also benefitted significantly from the pan-European networks, research excellence and financial support coming from Europe - and has itself contributed in the form of co-investment, expertise and market knowledge. 

Preparations for European framework programs are always difficult, triggering debates about instruments, budget shares and objectives. However, it is even more of an uphill battle for Carlos Moedas this time. The upcoming new framework program has to be shaped amid a storm of digital and technological transitions, globalization, protectionism and euro-skepticism. At the same time, policy makers appear to be becoming more and more risk-averse, preferring short-term, PR-oriented measures. There is some doubt as to whether sufficient political commitment to a strong, risk-taking European research initiative can grow in this climate. It therefore cannot be taken for granted that everything will go well this time and that EU research will survive in a way that still delivers added value for Europe.

Tax money for unicorns?

There is a long list of challenges to be met and questions to be answered: the speed of technological development such as digitization and market dynamics is putting current procedures and rules to the test; member states who are more and more focused on their national interest need to be convinced; and the arguments for costly industrial and technology policy initiatives need to be assessed. 

More specifically, the questions are: Should money go to single beneficiaries such as start-ups in the hope of spotting and celebrating a European "unicorn" as the answer to Google, Amazon or Uber? Or is it better to fund bigger project consortia and promote collaboration and exchange? Should calls be bottom-up with open themes, or roadmap-driven and descriptive? How far can loans substitute conventional grants and might they be a better use of taxpayers' money? How much proof of impact and accountability can be expected from projects without sacrificing curiosity and creativity? Should "excellence" be the overall guiding principle or should EU money be used to widen participation and to fill gaps in the EU-13, where participation is currently rather low?

EU research has already been adapting to changing requirements for decades. The 7th Framework program started to introduce more industrial relevance and piloting elements. Horizon 2020 continued this approach by shifting towards more innovation funding, close-to-market activities, the use of loans and measures to help lower-performing member states to catch up. New instruments such as contractual PPPs were launched, aiming to leverage more private co-financing and investment. The 315-billion euros fund EFSI was created to promote investment, taking part of its guarantees from the Horizon 2020 budget.

Doubts of a Commissioner

But Commissioner Modeas is now wondering whether the EU is doing the right thing. The 46-year-old is looking for a new challenge and wants to leave his mark. He believes that the EU money does not reach the "real innovators" - in his view, start-ups and people with good business ideas - and proposes the creation of a European Innovation Council as a counterpart to the European Research Council (the part of the framework program dedicated to basic research). In a recent speech, he stated, "But we lack sufficient disruptive market-creating innovation that is required to turn our best ideas into new opportunities, businesses and jobs. This is why Europe needs a European Innovation Council that will listen, harness and add value to the ideas of Europe's entrepreneurs and innovators."

These thoughts and questions are justified. New approaches are needed and old relics should be abandoned. For example, Moedas is right to ask whether the financial support reaches the right actors. He might be also right that, in today's world, long-term technology roadmaps and prescriptive call topics are failing. However, he must be careful not to go too far, lose focus and forget what is already working.

There are important elements that should be maintained - albeit overhauled. For example, the much-praised European project for pre-competitive collaboration is suffering the same fate as an endangered species: Everybody agrees that it is important and valuable - the 2015 Monitoring Report showed that 77 percent of the stakeholders think that Horizon 2020 adds value to support cross-border R&I collaboration - but space and resources for this type of R&I are being put under pressure and are shrinking all the time. On the other hand, Horizon might already offer a modern, updated version of this, which is in line with Moedas' ideas: "Fast Track to Innovation" - a bottom-up-instrument for innovation activities in smaller, cross-border consortia. 

Money is not everything

It is clear that this debate should not be left entirely to policy makers and research lobbyists. Industry is being challenged to ask itself what its expectations and the added value from European research funding are. In a recent consultation, the Commission challenged stakeholders to answer the question "What would be the impact for you or your organization if the EU stopped supporting research and innovation?" But it does not stop there. Industry also needs to make its contributions and commitments clear and explain how cooperation with Europe's R&I policy should look - both in financial terms (funding rates, leverage factors) and in terms of sharing expertise, enabling innovation and rolling out technological progress.

It is good to put the structure and instruments of European framework programs to the test and, in doing so, to tread the fine line between favoring old habits (and friends) and being tempted too much by shiny new ideas. Instead of replacing old patches with new ones, a bold strategic European vision for research is needed. Without this, the next framework program might end up as a multi-purpose shopping budget for all kinds of policy ideas and short-term fixes. 

A starting point for this strategy can be found in Art. 179 of the European Union's Lisbon Treaty: "The Union (...) shall support (...) efforts to cooperate with one another, aiming, notably, at permitting researchers to cooperate freely across borders and at enabling undertakings to exploit the internal market potential to the full." Most CEOs of engineering companies would agree with that.

Further Information

European Commission: Horizon 2020   |   VDMAimpulse 03-2016: "MOMENTS OF TRUTH FOR OETTINGER'S PLAN"

Kai Peters, VDMA European Office.