Greening the Economy

This European Business summit (EBS 2008) workshop will discuss Europe’s educational shortcomings and the links to innovation.

This post sets out the scope of the EBS 2008 workshop on “Education: managing Europe’s talent pipeline to drive innovation” (see EBS ’08 programme). Everyone interested in the topic, whether they’re coming to EBS 2008 or not, is welcome to use this blog to comment or submit their own ideas – see About this blog.

A. Innovation: The Challenges

  • Productivity is falling behind. For the first time in the post WW2 era the average growth rates of real GDP, labour productivity and total factor productivity have continued to fall further behind those of the USA for a period of almost a decade .
  • We are failing to capitalise on the application of ICT. Productivity growth has in recent years been driven mainly by the ICT-using services sector and it is precisely here that the difference is most obvious – productivity growth in the EU is relatively stable across time in contrast to a very large acceleration in the USA as it successfully applies ICT.
  • Europe is losing out as large firms globalise their R&D. The net imbalance of R&D investment by EU firms in the USA compared with US firms in Europe increased five-fold between 1997 and 2002, from about €300m in 1997 to almost €2b in 2002. It is well known that several major European firms no longer site new R&D initiatives in Europe. Additionally, US R&D investment has been growing at a much greater rate in areas outside the EU – about 8% per year in the EU and 25% per year in China.
  • European industry is locked into unmodernised traditional sectors and underinvesting in services R&D. Europe has a manufacturing profile that has a relatively low share in ICT –related sectors, and a structural trade deficit in high-tech manufacturing. Its services sector invests considerably less in R&D (0.2% GDP compared with 0.7 % of GDP in the US).
  • The population continues to age. According to Eurostat, by 2050 the working population will decrease by 52 million, even after allowing for net migration, and there will be a sharply rising dependency ratio, with the proportion of people over 65 rising from 16.4% in 2004 to 29.9% in 2050 .

B. The Talent Pipeline: The Challenges

  • The skills gap is growing. There is evidence to suggest that Europe is failing to keep up with the demand for skills driven by the knowledge economy. For example, it is estimated that the actual number of people needed to fill the advanced network technology skills gap in Europe was around 160,000 in 2005 and will rise to 500,000 in 2008. This represents skills gaps as a percentage of total demand of 8.1 percent in 2005 and 15.8 percent in 2008 .
  • There is a competitive gap in supply. China now already has the second-highest number of researchers in the world, 862,000, just ahead of Japan In Europe the numbers are flat or declining. There is insufficient development of the entrepreneurial thinking and skills that needs to complement Europe’s great engineers and technology researchers .
  • Europe has few top universities. Europe (including Switzerland) is home to only nine of the top 50 universities in the world.
  • The impact of research is low. Europe’s universities produce tons of paper – 46 per cent of all published scientific research; but they earn only 32 per cent of citations from colleagues around the world.
  • University’s financial results are poor. Compared to U.S. competitors, the tech-transfer offices of European universities file 17 per cent as many patents and earn 5 per cent as much license income.

C. Some Questions to be Addressed

  • Should the ideology of education be changed? For decades, in most European countries the prevailing policy has been to sprinkle funding across all institutions, as an instrument of regional development. The idea that one university is better than another – and thus should get more of the money – was heresy. That has hurt research.
  • Should Europe invent the “market-friendly university”? Should universities be transformed into institutions with the management and desire to work with industry? Innovation cannot be a bolt-on to existing structures, driven solely by the technology transfer office; it requires an outward-facing, business-friendly, professional and systematic approach.
  • How to compete in the global ware for talent? To maintain economic growth and innovation, the EU needs to attract top talent from around the world. However, the EU gets about 5% of skilled immigrants as compared to 55% for the USA . Unfortunately, migrants wishing to live and work in the EU have to deal with 27 different immigration requirements.
  • What is the role of public-private partnerships? Developing the talent pipeline is the joint responsibility of both private organizations and public bodies. Business has a significant role to play in moving towards a demand-led system of skills development, whereby skills requirements are clearly articulated and education and training programs reoriented to fit with that demand.
  • How to create more global entrepreneurs in Europe? To drive innovation, we need entrepreneurs who choose to develop their innovative ideas in Europe. However, entrepreneurs are not always seen as successful role models in many European countries. We need to make young Europeans want to become successful and innovative entrepreneurs.

D. Further Reading

Accenture (2007), Skills for the Future. A report produced for the Lisbon Council (EU). 2007.

European Commission (2006), Creating an Innovative Europe, (Aho Report), Report of the Independent Expert Group on R&D and Innovation appointed following the Hampton Court Summit and chaired by Mr. Esko Aho.

Innovation: The Demand Side, New Ways to Create Markets and Jobs in Europe, Science-Business, 2007

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