EU Innovation and Knowledge Diffusion Policy

The scope of this chapter is an analysis of EU policy and the reorientation required to accelerate the circulation and commercialisation of innovation and knowledge within Europe, taking into account leading-edge policy throughout the global economy. The focus is on policy towards knowledge creation and diffusion, and as such, includes a review of existing EU innovation and knowledge diffusion policies, of their effects (using evidence from the literature), a comparison with other major industrialised countries (the US in particular), and some policy implications in light of the reflections provided in chapter 2. I outline the fundamental trade-off of research and development (R&D) policy. Namely that providing incentives to innovate requires the appropriation of the returns from innovation and the diffusion of knowledge concerning the innovation. The chapter shows that EU policy has experienced a shift in policy emphasis, from one side of the trade-off to the other, namely from a focus on incentives to innovate to a focus on diffusion.This chapter shows that while the shift in policy emphasis has helped uncover some previously neglected problems in innovative activities, it has also led to a lack of precise policy recommendations. It seems that all actions that favour collaborative relationships have to be adopted, policy makers choosing from a sort of ‘shopping list’ of actions. Although networks need to be developed, their adequate type, size and institutional context does not appear to be discussed much. In addition, understanding the motivation to take part in networks seems to be neglected, although it is essential for their creation in the first place. In other words, we need to specify the incentives to take part in innovative activities, and in particular the possibility of appropriating returns from innovation arising in a collaborative network. Intangibles can bring new insights to this debate. I also discuss the nature and effects of intangibles and show that they might be the key determinants of the nature of those networks most appropriate to innovation and knowledge diffusion. A particular point regards the social capital associated with networks.