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January 6, 2005
Europe's innovation strategy
Two pieces in today's Financial Times of London caught my eye. Both having to do with how Europe is positioning itself to cope with this new economic situation. The first is a comment by the new EU industry commissioner Gunter Verheugen on competition policy (what we call anti-trust policy). While competition policy is not in his commission portfolio (Neelie Kroes is the new competition commissioner, replacing Mario Monti), Mr. Verheugen's statements may be taken as a possible shift in EU direction toward less stringent anti-trust enforcement:
He told Le Monde, the French newspaper: "We have to discuss the manner in which we deal with mergers, in the general interest of Europe.
Insofar as these help the creation of European champions, I am clearly in favour [of such discussions]."
. . .
Mr. Verheugen hinted that Neelie Kroes, the new competition commissioner, backed his views.
"Neelie Kroes, has a very good understanding of business. I have the feeling that she is not, in principle, opposed to the emergence of big companies, provided they exist not thanks to subsidies but their position in the market."
The second piece was a story about a French initiative to open its industrial innovation funding to companies from other European countries.
These two pieces raise an interesting point about Europe's (and the US's) innovation strategy.
With the recent criticism (see the Kohn report) of the failure of the EU to meet the goals of the Lisbon Strategy to become the world's leading information economy, it is clear that there some in Europe who are interested in jump-starting the process. The question is whether creation of large "European champions" and large-scale government funded R&D are the way to spark innovation.
Government funding (and incentives) for innovation is clearly important. This point was rightfully hammered on in the recent National Innovation Initiative report by the Council on Competitiveness. However, large scale funding projects is but one of many elements in an innovation strategy. Vigorous competition is another -- and creation of "champions" may not be the best way to promote that competition.
In fact, one of the key elements of a healthy, robust National Innovation System may be the mix of large and small companies. In the industrial age, big was better as economies of scale ruled. Large companies and massive research projects build on the economic of scope and scale. One of the paradoxes of the intangible economy is the simultaneous need for large and small, centralized and decentralized organization. We talk a lot about the small, fast moving virtual companies as the model for the future. Yet it is the large companies with their brand power and marketing ability who often come away with the greatest economic gains.
Thus, a strategy of creating large champions and pouring money into their research project is an idea whose time has come and gone.
Posted by Ken Jarboe at January 6, 2005 10:42 AM
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