1. Research and Innovation Research and Innovation State of the Innovation Union Clara de la Torre Director of Research and Innovation DG Research and Innovation Brussels, 19 April 2013

2. Research and Innovation Research and Innovation Overview State of the Innovation Union - overall progress highlighting state of play on the main EU initiatives. Country Profiles - analysis of performance of the research and innovation systems of individual Member States. Scoreboard - snapshot of performance based on 25 indicators spanning the whole innovation cycle. Allows comparison of relative strengths and weaknesses and performance monitoring. 2

3. Research and Innovation Research and Innovation Protecting public R&D spending 3 Increasing Broadly flat Decreasing

4. Research and Innovation Research and Innovation Findings Positives: Total R&D budgets of the 27 EU Member States increased nominally by ca. 8% between 2007 and 2011. Business R&D expenditure in the EU also 10% higher in 2011 than before the crisis (2007) in nominal terms. Top R&D investing companies headquartered in the EU expect their global R&D investments to grow by an average of 4% annually over the period 2012 to 2014. EU R&D intensity grew from 1.85% of GDP before the crisis (2007) to 2.03% of GDP in 2011. 4

5. Research and Innovation Research and Innovation Growing Innovation Divide 5 Innovation leaders Modest innovators

6. Research and Innovation Research and Innovation Findings Warning signs: Total R&D investment by EU Member States slowed down in 2010 and decreased in 2011. Increasing disparities in performance of Member States and regions - process of convergence in performance has come to a halt for the first time since 2001 Firms piling up cash reserves and differing research and innovation investments due to low confidence in future prospects of the European economy. 6

7. Research and Innovation Research and Innovation International Comparison Innovation leaders, US, Japan and South Korea outperform EU. Innovation performance gap with US and Japan has closed since 2008, but performance lead of South Korea has increased. EU continues to have a strong performance lead over Australia, Canada and all BRICS countries, but China is catching up. 7

8. Research and Innovation Research and Innovation Global value chain income 8

9. Research and Innovation Research and Innovation FDI by US firms 9

10. Research and Innovation Research and Innovation Not all bleak! One of the world best-performers in terms of high quality science and innovative products Capture the largest share (28%) of income generated in global manufacturing value chains Prime beneficiary of foreign R&D investments by US firms Specialised in medium-high tech sectors, but two-thirds of business R&D investment in US clustered in high-tech – e.g. health and ICT. 10

11. Research and Innovation Research and Innovation Policy Shift Concrete actions on European Research Area Improved business environment thanks to unitary patent, faster standard setting, modernised EU procurement rules and a European passport for venture capital funds European Innovation Partnerships are pooling resources and concentrating demand and supply-side measures on key societal challenges Gist of the Commission's proposal for Horizon 2020 accepted. 11

12. Research and Innovation Research and Innovation Implications for Member States "Invest, Reform, Transform" Continue to invest by protecting R&D budgets Reforms to improve the efficiency of the national research systems European economy must be transformed through a stronger presence in high-tech sectors while maintaining and revitalising current industrial fabric 12