The European Union and its member states struggle to meet the ambitious goal set at the 2000 Lisbon Summit of becoming “the most dynamic and competitive knowledgebased economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion, and respect for the environment by 2010”. This article aims to outline the main weaknesses of the European approach to research and development.

In recent years, research and development (R&D), education, sharing and transfer of knowledge – as well as increasing competitiveness - have become frequently discussed topics. At the Lisbon European Council Summit of March 2000, Europe set out to become the world’s most competitive knowledgebased economy. The so-called Lisbon Strategy was supplemented at the 2003 Barcelona Council Summit with an objective to increase investment in R&D programs up to the amount of 3% of gross domestic product (GDP). This article does not intend to comprehensively explain R&D issues, it merely aims to assess and outline the main weaknesses of the European approach to venture capital – such as scientific progress and knowledge.

Assessment of financial resources is a prerequisite for any contemplation of investments in R&D. By 2010 each Member State should invest a minimum of three percent of its GDP in education, knowledge transfer and centers of excellence. The European Commission and the Council anticipate that most of the venture capital should originate from private sources and a smaller portion from public ones.

However, in my opinion there are several drawbacks to this approach:

The determination of these financial resources in percentage is symbolic. It illustrates the degree of priority with which the respective state (Community) approaches certain projects. However, if we speak of the financing rate, the proportion only has informative value once we know the real volume of funds identified as GDP. This represents a standard valuation procedure if a homogenous unit with its own budget makes this decision. In the case of EU, the European institutions represented a player that decided upon a certain target, even if it was generally approved by the stakeholders. However, it is difficult to identify the reference point used in the determination of such target, since according to current trends one can assume that if the 3-percent threshold is achieved, Europe and its competitors will score about the same in 2010 in financial terms. However, money cannot be deemed the goal – it is merely one of the necessary prerequisites. And this is all the more so with R&D. The framework in which R&D is evolving represents a factor of at least equal importance. I particularly mean the legislation and the setup of general conditions.

As we speak the EU has no real common policy on research and development. The internal fragmentation is illustrated, for example, by the absence of a single European patent. Although the idea of its creation is appealing - and indeed welcome by all Member States - selecting the language in which patents are to be issued represents a stumbling block. Unless this situation changes, the recognition of uniqueness and enforceability of intellectual property rights will remain crippled. If research teams or companies want to obtain a patent, they will continue to have to undergo many different procedures and will have to comply with many different criteria applicable in the individual Member States. The bureaucratic burden is becoming heavy enough to crush many innovative ideas at the outset.

The third obstacle, in my opinion, is the absence of a synergy effect. The European institutions’ perception is simplified and ignores the still present European fragmentation. It is this fragmentation - which we are yet unable to effectively counter – that prevents Europe from yielding the maximum profit possible out of the earmarked funds. The amount of added value is equally disputable. Figuratively speaking, each country will be building houses in its own sandbox, but nearly none will have enough material to build a big castle. Castles could be built only if all 27 sandboxes are put together to form one gigantic pile. The example of volumes and sandboxes could also be used to compare the volume of GDP and the proportion allocated from it. Some countries have a smaller sand pile; taking three percent of that will only fill a small bucket at most. By contrast, three percent of a large sand pile can be transformed into many different shapes and, ideally, into several autonomous units.

As the last serious obstacle to effective R&D, I would point to the established ways and the nature of European policymaking. By this I mean that European leaders love to compete in giving the most optimistic guide or vision of how to tackle future challenges. The history of European integration is full of many successful and unsuccessful plans and speeches that either did or did not materialize in political reality. Therefore, it is common that European leaders strive to provide a vision for R&D that is most ambitious, even if it is inconsistent with the current reality. European policy is currently a two-level game, operating at both the national and European levels. Although these levels are interconnected, many competencies (especially in the field of R&D) are clearly separated, making room for political leaders to give different statements and take different measures with respect to the same topic before their voters and before their partners in Brussels. The new Member States, in particular, suffer from this syndrome. Simply put, if we look at the map of the EU, we can say that the farther east we go:

• the greater the gap between the 3% target and the current financing level;
• the higher the ratio between the specific country’s national objective and its current R&D financing intensity.

In other words, those countries lagging behind most in terms of R&D are setting the most ambitious goals for themselves.

In conclusion, to know problems and to make a list of drawbacks can be a solid basis for thinking about R&D in the future. In matter of more intensive development of innovations, European unity is the key factor. EU should act as a homogenous body in order to reach the economy of scale on the field of excellence. In other words, not only single target - 3% of GDP invested into R&D - is necessary, but one single budget and common approach as well. Tackling the problem with single European patent can be the first “swallow that will make a summer.” I hope it will be established soon. After it will happen, the new principle should be approved - to unify national targets into one and to establish some kind of Common R&D Policy.

Notice: This article was prepared for and published in Connection Magazine (06/2008) of The American Chamber of Commerce in The Slovak Republic.