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An Innovation Union for SMEs
By: Máire Geoghegan-Quinn, EU Research and Innovation Commissioner
02 March 2011

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Small and medium-sized enterprises – SMEs – will be the powerhouse of the Innovation Union that the EU must become if we are to enjoy sustainable prosperity in the face of ever stronger global competition.

With our Innovation Union proposals on 6 October, the European Commission is calling for a concerted drive at European, national and regional levels towards three broad objectives.

Máire Geoghegan-Quinn, EU Research and Innovation Commissioner

First, to make Europe a world-class science performer. Second, to better target public sector intervention on releasing private sector potential. Third, to remove bottlenecks that prevent good ideas getting quickly to the market.

But politicians cannot create success from the top down. Only businesses and their employees can deliver a thriving Innovation Union.

Some 99 per cent of European businesses are SMEs. They account for two-thirds of jobs in the non-financial business sector. 

We want to sweep away barriers that stop innovative SMEs reaching their potential. We want to use public policy to give SMEs a leg up – both to allow them to compete better with larger rivals and to put them in a better position to work with bigger companies, such as Microsoft.

For example, the EU Patent, on which the Commission is urging Member States to agree, would dramatically reduce the cost of patenting in Europe. The Commission will also make proposals for a European knowledge market for patents and licensing. This dual approach would allow SMEs both to patent more of their inventions and to trade and exchange them on equal terms with larger companies.

Innovation is not only for technology companies. The Innovation Union is relevant for every type of SME: from cutting-edge nanotech firm to the corner shop. It aims to boost areas like design and the creative sector, as well as public sector innovation, which, by improving administration, can itself help SMEs.

Access to finance

Access to finance is often the biggest hurdle for SMEs. For example, EU levels of venture capital are a quarter of those in the US. We will propose a regime to enable cross-border venture capital funds to operate easily, and we will appoint a leading figure to strengthen cross-border matching of suitable investors with innovative firms. The main beneficiaries are likely to be SMEs. 

The Commission will work with the European Investment Bank to scale up our highly successful existing schemes where our joint finance for companies undertaking significant but risky research and innovation has leveraged over 20 times its value in private investment.

We will review the way the €86 billion in EU structural funds available for research and innovation for the period 2007 to 2013 is being spent. One of the objectives will be to use that funding better to support SMEs.

The Commission is itself taking the role of an entrepreneur and has proposed a major new approach: European Innovation Partnerships. These will mobilise stakeholders – EU, national and regional, public and private – behind well-defined goals in areas that combine tackling societal challenges with the potential for Europe to become a world leader. Partnerships will step up R&D, coordinate investment, speed up standardisation and mobilise demand.

The first pilot, on active and healthy ageing, will aim to extend by two years, by 2020, the proportion of our lives in which we enjoy good health.

Future Partnerships will cover areas such as energy, “smart” cities, raw materials, water efficiency, “smart” mobility, and sustainable agriculture. For companies, they should provide a clear direction of where Europe wants to be, backed up with coherent support and market opportunities. There will be chances for SMEs to build new markets – and potentially, through pre-commercial public procurement, to get support for R&D activities.

Máire Geoghegan-Quinn, EU Research and Innovation Commissioner


More generally, we want national, regional and local authorities to use public procurement – which accounts for 17 per cent of GDP – to test innovative solutions. Until now, this has been far more common in the US than in Europe. That should provide further opportunities for SMEs.

Faster standard-setting – on which we will bring forward legislation and which the Partnerships can also help achieve – will help SMEs. The earlier there is certainty on standards, the better SMEs can tap into markets for new products and for interfaces and accessories.

The Commission is committed to simpler access and stronger involvement of SMEs in the EU’s Research Framework Programmes, which are bigger and better than ever before, with annual funding under the Seventh Framework Programme (FP7) due to rise from about €7.5 billion in 2011 to about €10 billion in 2013.

Good progress has already been made: 12.3 per cent of the FP7 money allocated by the end of 2008 had gone to SMEs. This equated to a total of €930 million. By July 2010 SMEs’ share had increased to 13.4 per cent, or €1.88 billion.

So SMEs will be at the centre of the Innovation Union, where they belong. And we will continue dialogue with SME representatives to make sure the Innovation Union gives dynamic SMEs what they need to grow – and to help Europe do the same.

This article was first published in Futures Magazine #7 in December 2010. Click here for access to the full magazine in PDF.

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