Innovation Paradox in EU
Reading two papers come to interesting paradox in EU innovation ecosystem.
Why does Europe’s business sector, despite having some top performers, have a persistently lower innovative capacity on average when compared to the US?
We investigate the age and sector composition of Europe’s business innovation structure and identify the lack of young innovative companies (“yollies”) in innovation- based growth sectors as the major source of Europe’s persistent lagging business innovation deficit relative to the US. Europe simply has too few yollies in the right sectors, which can form the nucleus for a capacity to shift economies towards new opportunities for growth. (1)
and then another research showed us this
When we focus on two of the key drivers of economic growth — R&D and education — and visually inspect the data , a clear pattern arises: a positive correlation of tertiary education and R&D with EEA , and a negative correlation of tertiary education and R&D with TEA. (2)
( — for definition of EEA and TEA look below)
Paradox is following
At one side reason for low innovation capacity is the lack of young innovative companies (“yollies”), and then at the another side more money is invested in R&D and education — it show negative impact of creation of those ?
Critically looking on the process it follows;
big companies have lot of money, with that money they support politicians (by financing their campaigns), then those invest more TAX payers money in education and R&D, which in turn result in higher innovation activities of their employees, making them more money (by increasing inequality) — but by doing so agents (big companies) reduce the innovation capacity of the system they exist (EU level) making it more vulnerable and threat it existence in long term.
What could be possible interventions to to break this vicious loop ?
Simple solution
Instead of collecting TAX money by gate keepers (governments) and which then they distribute into R&D and education — provide tax deductions to large companies for the purpose of spending it in two directions — one into academic research and another into buying products and services from companies that have radical and transforming technologies and science research implemented in their products. Then government instead of spending time, money and energy to distributed collected tax they could focus on the control of the implementation of such a policies.
Radical solution
Clear distinction between
a) Radical science provides new insights and elaborates new concepts that depart significantly from past paradigms.
b) Radical innovation is innovation that breaks established rules (3)
The knowledge spillover theory of entrepreneurship (4) make distinction between new and economic knowledge and underline importance of the knowledge filter between those two type knowledge. Its described in terms of legal and regulatory frameworks and uncertainty, asymmetry and high cost of transaction inherent in knowledge related decision making.
So (radical) science is financed by public money (in most cases), so it should stay in public domain , and then process of filtering (regulation) should be done in a way that it spillover towards “yollies”, and by applying principles of decentralised autonomous organisations (see definitions) make public share of ownership in the hands of public. In that way ownership and associated benefits and responsibilities are split between public domain and private domain.
Question is how current EU system is resilient and where is the tipping point is when the system will start to behave in the way it could not be managed (i.e. Greece). So trying to resolve this paradox is one of the task we as a collective have to tackle in the nearest future.
Definitions
Entrepreneurial employee activity (EEA) — EEA rate measures the prevalence (in the population of 18–64 years) of employees who, in the past 3 years, have been actively involved in the development of new activities for their main employer, had a leading role in at least one phase of the entrepreneurial process, and are also currently involved in the development of such new activities
Total Entrepreneurial Activity (TEA) rate. The TEA rate reflects the percentage of the adult population (aged 18–64 years) that is actively preparing to set up an independent business (nascent entrepreneurs) or currently owns an independent business that is less than 42 months old (owner-managers of new businesses).
A decentralized autonomous organization (DAO), fully automated business entity (FAB), or distributed autonomous corporation/company (DAC) is a decentralized network of narrow-AI autonomous agents which perform an output-maximizing production function and which divides its labor into computationally intractable tasks (which it incentivizes humans to do) and tasks which it performs itself.[1][2] It can be thought of as a corporation run without any human involvement under the control of an incorruptible set of business rules. These rules are typically implemented as publicly auditable open-source software distributed across the computers of their stakeholders. A human becomes a stakeholder by buying stock in the company or being paid in that stock to provide services for the company. This stock may entitle its owner to a share of the profits of the DAO, participation in its growth, and/or a say in how it is run.[3] — source https://en.wikipedia.org/wiki/Decentralized_autonomous_organization
References
1 Veugelers, R., Cincera, M., Frietsch, R., Rammer, C., Schubert, T., Pelle, A., … & Leijten, J. (2015). The Impact of Horizon 2020 on Innovation in Europe.Intereconomics, 50(1), 4–30. https://www.researchgate.net/publication/271524118_The_Impact_of_Horizon_2020_on_Innovation_in_Europe
2. Stam, E. (2013). Knowledge and entrepreneurial employees: a country-level analysis. Small Business Economics, 41(4), 887–898.
https://www.researchgate.net/publication/258165363_Knowledge_and_entrepreneurial_employees_a_country-level_analysis?enrichId=rgreq-54be8aae-a236-4a61-bda9-5e7c6d56060b&enrichSource=Y292ZXJQYWdlOzI1ODE2NTM2MztBUzoxNzI2MDYzNzIxOTYzNTJAMTQxODE2Mzk3NDU3Mg%3D%3D&el=1_x_2
3. Colombo, M. G., Franzoni, C., & Veugelers, R. (2014). Going radical: producing and transferring disruptive innovation. The Journal of Technology Transfer, 1–7.
https://www.researchgate.net/publication/271920747_Going_radical_producing_and_transferring_disruptive_innovation
4. Acs, Z. J., Audretsch, D. B., & Lehmann, E. E. (2013). The knowledge spillover theory of entrepreneurship. Small Business Economics, 41(4), 757–774.
