Europe Needs to Remove Structural Barriers to Innovation

On 9 September, the European Commission will discuss the European Innovation Act (EIA) at its college meeting. The EIA aims to specifically strengthen innovative capacity in the European Union and improve overall conditions for research, technology transfer and growth-oriented companies in international competition.  

Professor Hanna Hottenrott, head of the “Economics of Innovation and Industrial Dynamics” Research Unit at ZEW Mannheim and professor at the Technical University of Munich, explains: 

“The European Innovation Act addresses important barriers to innovation in Europe. Bureaucratic structures and the fragmentation of the Single Market make it particularly difficult for young companies to turn a good idea into broader market success. The planned improvements in access to testing, research and data infrastructures are therefore particularly important. Because of the high costs involved, start-ups often cannot build themselves the laboratories, computing capacity and testing facilities that are needed in deep-tech fields such as semiconductors, biotechnology, quantum computing, robotics, energy technologies and AI. Easier access to infrastructure can lower barriers to market entry, shorten development cycles and significantly strengthen the competitiveness of European companies.

Better conditions for growth financing are equally crucial. A more liquid growth-capital market and simpler procedures for initial public offerings would make it easier for European start-ups to expand internationally. The enhanced role of the European Investment Bank and the European Investment Fund is therefore to be welcomed, provided both retain their operational autonomy. At the same time, the Innovation Act should not create yet another funding instrument but should remove structural barriers. This also includes a compelling strategy for skilled workers and skill development.

More innovation-friendly public procurement also offers an opportunity. If public institutions make a conscious decision to purchase innovative solutions, they can provide young companies with their first major reference customer while at the same time creating early demand for new technologies. Public procurement can therefore help to bridge the so-called ‘valley of death’ between research and successful commercialisation – and, in areas such as green technologies or medical technology, it can even help create new markets.”