Challenges ahead: boosting innovation-led growth in EU regions

Smart specialisation has made a real difference in the way European regions are designing their innovation strategies, creating or reinforcing cooperation at all levels, especially with local business spheres.

There is room for improvement; to better help regions catch the train of globalisation, this Commission communication identifies four main challenges to regional innovation, as well as actions and policy solutions to tackle them, under the regions’ smart specialisation strategies.

The experience acquired so far with current Cohesion policy programmes, together with the actions and policy solutions put forward in this communication will provide a useful input in preparing the next Multiannual Financial Framework.

The Commission will seek to shape a broader approach to boosting innovation-led growth in the EU, with the objective of making smart specialisation a comprehensive tool to help all regions seize the opportunities brought by technological change, digitisation and industrial modernisation.

Challenge 1: Boosting innovation capacity in less-developed and industrial transition regions

The Commission already highlighted the specific needs of less-developed regions in relation to their innovation capacities and connection with global value chains. Commission-supported pilot projects led in two Polish regions showed promising results, especially as regards the development of competitive clusters and the reform of the business environment.

Regions in industrial transition face different challenges. Trailing behind in terms of innovation in a globalised context, they don’t benefit from the same EU financial support as less-developed regions, although they may be unable to attract sufficient investment to develop new comparative advantages and move up the value chain. Often carbon intensive, they can combine lack of an appropriate skills-base, high labour cost and deindustrialisation.

What the Commission proposes:

To accompany the industrial modernisation of these regions, the Commission will promote an EU-funded pilot action including a number of volunteer regions to help revamp their innovation systems on the basis of their smart specialisation strategies.

This pilot action will provide on-demand support from Commission experts as well as technical assistance actions supported by the European Regional Development Fund (ERDF), in order to facilitate the combined use of existing EU instruments with the aim to accelerate innovation uptake, remove investment barriers, facilitate reskilling and prepare for industrial and societal change.

These partnerships should be in place by March 2018. By the end of 2018, each partnership should have defined a set of actions to foster economic transformation, identifying possible funding opportunities at European, national and regional level.

As per the Commission’s “EFSI 2.0” proposal, this hands-on support could be complemented by guidance by Commission investment envoys on the ground on opportunities to combine EU funds and instruments, such as the European Fund for Strategic Investments (EFSI – the heart of the Juncker Plan) and Cohesion Policy funds.

Challenge 2: Increasing cooperation in innovation investment across regions

To develop innovative products and expand beyond local markets to create – or rebuild – European value chains, regions and their local industrial spheres need to join forces and pool their resources, in tight partnership with innovation actors and researchers.

Interregional investment networks in industrial renewal already exist. The Vanguard initiative gathers 30 EU regions who jointly develop high value added projects, on the basis of matching smart specialisation priorities.

This Initiative has served as model for thematic Smart Specialisation platforms, under which 100 regions with matching assets can develop project pipelines, share research infrastructure (testing facilities, data centres or Fab-Labs) and benefit from the expertise of Commission experts.

What the Commission proposes:

To go one step further and build on existing networks and platforms, the Commission will launch an EU-funded pilot action by the end of 2017 in order to scale-up interregional innovation projects. Small projects will have the opportunity to integrate large investment pipelines, bringing together EU funds in the most efficient way.

Five to ten thematic partnerships will be created with policy-makers, researchers, businesses and other innovation actors. High value added economic sectors will be targeted, such as bioeconomy, big data, health or connected mobility as well as traditional sectors with innovative manufacturing processes.

The smart specialisation thematic platforms will act as the coordination structure where selected partnerships can work with teams established within the Commission, involving experts from several Commission departments.

Challenge 3: The need to reform regional innovation systems

As a prerequisite for Member States to benefit from Cohesion Policy funding in research and innovation, smart specialisation has proven to be a powerful incentive for Member States and regions to carry out reforms and improve multi-level governance.

Today, broader reform efforts of regional research and innovation systems require particular attention to three cross-cutting issues, according to recommendations issued in the context of the European Semester: the quality of public research, efficient business-science cooperation with the right support for technology transfer, and a business-friendly environment.

Efforts to conduct reforms should be complemented by investments in the right skills, education and training to better match today’s and tomorrow’s job market demands, in line with the New Skills Agenda.

What the Commission proposes:

The Commission will step up its efforts to encourage Member States to make full use of available EU support to facilitate the design and implementation of reforms. For example, on-demand assistance from the Structural Reform Support Service can help improve the business environment and break down silos between administrative bodies.

The Horizon 2020 Policy Support Facility will help Member States address obstacles in their research and innovation systems, including those related to an effective implementation of smart specialisation strategies.

Member States are invited to reinforce the dialogue with all concerned stakeholders in the course of the European Semester process, including regions and local authorities. They should also develop local skills-bases by better linking vocational education and training systems to smart specialisation priorities.

Challenge 4: Facilitating synergies between EU policies and instruments

Currently there is a substantial number of regional, national and European policy instruments aiming at research and innovation, growth and competitiveness or at promoting interregional cooperation.

Efforts have already been undertaken to promote and simplify combinations and synergies between the European Fund for Strategic Investments (EFSI) under the Juncker Plan, Horizon 2020 and Cohesion policy funds.

What the Commission proposes:

The Commission will work with national and regional authorities and help them combine the funds, in particular by providing further clarifications on synergies as regards state aid and public procurement.

To boost interregional cooperation, the Commission will continue to work with the European Parliament and Council in the context of the ongoing discussions on the mid-term review of the Multiannual Financial Framework to further facilitate transnational investments, such as the implementation of operations outside an EU funds programme area. The Commission will also provide stakeholders with a comprehensive mapping of support actors and facilities to foster cross-regional industrial partnering and access to competences.

Simplifying synergies and aligning rules between different EU funding instruments is high on the Commission’s agenda in the framework of the discussion on the future of the EU finances which the Commission launched on 28 June with its dedicated reflection paper.

In this context, a High Level Group on Simplification for the beneficiaries of EU funds set up by the Commission recently published its final conclusions for the post-2020 framework, with ideas to facilitate further combinations between EU funds.

Source: The European Commission