Is a European Recovery Possible Without High-Tech Public Corporations?

Research and Development DOI: 10.1007/s10272-021-0973-x Daniele Archibugi and Vitantonio Mariella* Is a European Recovery Possible Without High-Tech Public Corporations? Pervasive new technologies associated with information and communication technologies and software are dominated by a restricted oligopoly of US-based corporations. The challengers are no longer European firms, but rather Japanese or Chinese companies. The actions taken by the EU to fill this technology gap, including the Framework Programmes for research and technological development, are beneficial but still insufficient in terms of the resources committed. This article argues that the EU urgently needs to add another economic policy instrument to defy these incumbent firms, namely to create a few publicly supported large corporations in the areas of greater scientific and technological opportunities. This will be complementary to the already ongoing mission-oriented innovation policies. While there are the political and economic difficulties of implementing such a strategy, one recalls the pioneering venture of Airbus, established more than 50 years ago that has successfully managed to challenge the dominant US-based passenger aircraft producers despite several economic and political controversies. Could similar attempts be replicated for green technologies, healthcare services and artificial intelligence? There is a consensus that Europe will start a solid recovery after the COVID-19 crisis only if supported by remarkable direct government intervention. The existing policy instruments at the national and European levels, and © The Author(s) 2021. Open Access: This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (https://creativecommons.org/licenses/by/4.0/). Open Access funding provided by ZBW – Leibniz Information Centre for Economics. * Preliminary versions of this paper were presented at the webinars organised by the Birkbeck College’s Centre for Innovation Management Research, University of London, 20 May 2020 and at the Forum “The New European Industrial Strategy after The Great Financial Crisis and the Covid Crisis”, 4 February 2021. We wish to thank the participants and Andrea Filippetti, Andrea Guido, Margarita Estevez-Abe and Carlo Milana, for their comments. Grants from the School of Business, Economics and Informatics of Birkbeck, University of London, and the financial support of PRIN (Projects of National Interests promoted by the Italian Ministry for University and Research) Innovation and Global Challenges Prot. 20177J2LS9 are gratefully acknowledged. Usual disclaimers apply. Daniele Archibugi, IRPPS – Italian National Research Council, Rome, Italy; and Birkbeck, University of London, UK. Vitantonio Mariella, IRPPS – Italian National Research Council, Rome, Italy. 160 most notably those made available with the Recovery Fund, support and boost economic, technological, social and cultural development. Can the European economic recovery be knowledgeintensive? One of the key priorities aimed at enhancing the European economy is that of bridging the scientific and technological gap of the EU vis-à-vis the United States and Japan, as these competencies are needed to sustain rising industries. We know that the EU is composed of very heterogeneous countries; while research and development (R&D) intensity, i.e. R&D expenditure as a percentage of GDP, is high in some member states, others are lagging. Overall, the EU has a lower R&D intensity than the US and Japan and it is now challenged by emerging countries such as China (see Figure 1). For several decades, the EU has carried out a battery of actions to enhance education, science, technology and innovation. Specifically, the EU Framework Programmes started in 1984 and tried to foster European capabilities in promising technological areas. Among them, a crucial role has been devoted to supporting information and communication technology (ICT) clusters, perhaps because they were considered an enabling technology on which the overall economic prosperity depended. How- Intereconomics 2021 | 3 Research and Development Figure 1 R&D intensity and gross domestic expenditure in China, Japan, the EU and the US, 2000-2018 percentage of GDP; and total amount in billions of US dollars (size of the circles) % 4.0 3.5 3.0 133.3 2.5 361.5 2.0 1.5 1.0 0.5 0 1995 To prove our point, a comparison with China is certainly instructive. China has substantially increased the resources devoted to education, R&D and innovation; but to exploit this investment economically, it is bolstering new companies able to compete with big tech American corporations, especially in new strategic industries. In comparison, the EU response is much feebler. 173.3 551.5 462.6 428.5 264.5 39.9 2000 2005 Japan 2010 US 2015 2020 China EU28 2025 Source: Elaboration on OECD, Main Science and Technology Indicators, 2020. ever, the gap with the US is still substantial. The Framework Programmes have played a crucial role in creating capabilities across the old continent, also allowing integration and intra-European collaboration among firms and universities, but they have not managed to close the gap, nor could they have achieved such a demanding task on their own. The overall economic consequences of the 2008 financial crisis have also affected science and technology. The EU level of investment – one of the main engines of innovation – was still below its 2008 level when the COVID-19 crisis broke out. In many EU member countries, public investment, rather than acting anti-cyclically, decreased even more than the business investment. The EU tried to sustain the total level of investment with the European Fund for Strategic Investments, but this also proved to be insufficient (Archibugi et al., 2020). The current and post-COVID-19 instruments, including the European Recovery Fund, will eventually provide massive resources to support public investment plans and a substantial part will be devoted to R&D and innovation. But the bulk of these resources will be managed by national authorities under European Commission supervision and not, like the Framework Programmes, directly by the European Commission. This article asks the question: Can the EU fill the technology gap through public investments and incentives to R&D and innovation without also attempting to create enterprises in high-tech industries? We doubt it. Our view is that the interventions aimed at financing and supporting the activities of the existing institutions and firms are certainly useful, yet this may not be enough. We suggest ZBW – Leibniz Information Centre for Economics that a cluster of new firms that are able to contribute to the generation of technological opportunities and, above all, the capacity to transform them into viable commercial products, processes and services, may be needed. The following section briefly outlines the EU strategies and e (...truncated)