Dare and Care

The following briefing note has been prepared by INSEAD, on behalf of the Moderator for Session 4, Dr Soumitra Dutta. The summit – titled Dare and Care – will be held on 26th and 27th March 2009.

Please feel free to comment before and after the session about the topic below.

Stuart Langridge
Director of Blogactiv.eu

Introduction: Facts and Figures

Brains in Business
• In 2004, R&D expenditure as a share of GDP in the EU-25 decreased slightly to 1.90%. A gap exists with regard to R&D expenditure in Japan (3.15% in 2003) and the United States (2.59%).
• In 2004, the leading EU-25 Member States in terms of R&D intensity were Sweden and Finland, with 3.74% and 3.51% of GDP devoted to R&D expenditure, respectively. Other EU-25 countries with R&D intensity rates above the EU average of 1.90% are Denmark (2.61%), Germany (2.49%), Austria (2.26%), France (2.16%) and Belgium (1.93%).
• 1.46% of total employment in EU-25 was in R&D in 2004, the head count being 2.82 million people. When measured in full-time equivalent (FTE), EU-25 R&D personnel amounted to more than 2 million, which represents an increase of 1.3% compared to the previous year. In 2003, Germany and France employed almost half of the EU-25 R&D personnel measured in full-time equivalent, as their R&D personnel amounted to 473 000 and 346 000 persons respectively.
• In 2004, over 1.2 million researchers, measured in FTE, were employed in EU-25, an increase of 57 800 since 2002. The majority of EU-25 Member States (except for Latvia and Hungary) saw their number of researchers increase between 2002 and 2004. Most European researchers work in Germany (269 000), France (193 000) and Spain (101 000). Female researchers were under-represented in the EU-25 compared to male, especially in the business enterprise sector. In 2003, they accounted for 28.3% of total researchers.
• In 2002, 59 736 patent applications to the European Patent Office (EPO) came from EU Member States, 46 816 from the United States and 24 494 from Japan. 87 116 patents granted by the USPTO came from inventors residing in the United States, 32 178 from Japanese residents and 24 733 from European residents. These figures show that there is a home country advantage. Data on patent families are generally less biased, as the “home advantage” disappears to a certain extent. In 1999, 36% of triadic patents came from American investors and 29% each from European and Japanese investors
• In 2004, almost 130 million people were employed in services in EU-25, whereas more than 36 million were employed in manufacturing. Of the 130 million jobs in services in EU-25, half of these were in knowledge-intensive services. Of the total workforce in manufacturing and services of 166 million, almost 20 million persons were employed in high-tech manufacturing and services within the EU in 2004.

• In EU-25 less than 30% of all persons employed in manufacturing were female in 2004. This ratio was often higher in the new Member States than in the old ones. The highest ratio of female employment was in high-tech manufacturing (35.6%). In EU-25, 60.1% of persons employed in all services were female. This proportion is about twice as high as the employment share of female in total manufacturing. However the proportion of female employees was lower in knowledge-intensive services (KIS) and lower still in high-tech KIS, with ratios of 53.4% and 33.8% respectively

Brains in Universities
• Europe’s tertiary education institutions produced close on 2.5 million new graduates in 2003 in the EU. This compared with just over 1 million new graduates in Japan and over 2.3 million in the United States. A higher proportion of female students graduated (compared to the female share of the student population). On average, 59.7% of all graduates were female in the EU in 2003. In comparison, the proportion of female graduates from tertiary education in Japan was 49.0% and in the United States 57.4%.
• The overall number of students taking tertiary education courses is growing in Europe, at an annual average rate between 1998 and 2003 of 5% for male students, and of up to 6% for female students. In 2003, over 14 million people in the EU were following tertiary education courses, of whom more than 350 000 were PhD students. One student in four, in 2003, was following a course either in “science, mathematics and computing” or in “engineering, manufacturing and construction”. Though female represented more than half of all students in most countries, engineering courses, and to a lesser extent science courses, attract fewer female. Accounting for 54.7% of the EU’s total tertiary education student numbers, female represented only 14.3% in engineering courses and 10.6% in science courses.
• The stock of human resources in S&T (HRST) is growing over time. In order, Germany, the United Kingdom and France had the highest number of HRST in 2004 (more than 10 million in each country), which accounted for nearly half of the EU’s 76 million HRST between 25 and 64 years old. However, in terms of total employment in the same age group, the 29.5 million persons working in S&T and having a tertiary education accounted for 15% of total employment.

The Challenges

Brains in Business

• Losing out as large firms globalize their R&D. The net imbalance of R&D investment by EU firms in the USA compared with US firms in Europe increased five-fold between 1997 and 2002, from about €300m in 1997 to almost €2b in 2002. It is well known that several major European firms no longer site new R&D initiatives in Europe. Additionally, US R&D investment has been growing at a much greater rate in areas outside the EU – about 8% per year in the EU and 25% per year in China.
• Attracting, retaining and developing talent: European businesses have to succeed in attracting the best talent from around the world, invest in their development and make best efforts to retain them. Doing this is not always easy given the social challenges in integrating immigrants in many countries.
• An Ageing Population. According to Eurostat, by 2050 the working population will decrease by 52 million, even after allowing for net migration, and there will be a sharply rising dependency ratio, with the proportion of people over 65 rising from 16.4% in 2004 to 29.9% in 2050 .
• Collaboration with universities: European businesses have to nourish closer collaborative links with universities. Doing this is difficult when many European universities still operate as isolated ivory towers or give little say in their governance to the private sector.

Brains in Universities
• A growing skills gap. There is evidence to suggest that Europe is failing to keep up with the demand for skills driven by the knowledge economy. For example, it is estimated that the actual number of people needed to fill the advanced network technology skills gap in Europe was around 160,000 in 2005 and will rise to 500,000 in 2008. This represents skills gaps as a percentage of total demand of 8.1 percent in 2005 and 15.8 percent in 2008 .
• Few top universities. Europe (including Switzerland) is home to only nine of the top 50 universities in the world.
• Low impact of research. Europe’s universities produce tons of paper – 46 per cent of all published scientific research; but they earn only 32 per cent of citations from colleagues around the world.

Questions to be addressed
• How to increase investments in R&D: European firms need to invest more in R&D in order to compete successfully in the global stage. What kind of incentives need to be put in place to encourage such investments in R&D locally in Europe? What is the role of government procurement and programs in supporting such increased investments in R&D?
• How to create more global entrepreneurs in Europe? To sustain an innovative private sector, we need entrepreneurs who choose to develop their ideas in Europe. However, entrepreneurs are not always seen as successful role models in many European countries. We need to make young Europeans want to become successful and innovative entrepreneurs.
• How to compete in the global war for talent? To maintain economic growth and innovation, the EU needs to attract top talent from around the world. However, the EU gets about 5% of skilled immigrants as compared to 55% for the USA . Unfortunately, migrants wishing to live and work in the EU have to deal with 27 different immigration requirements.
• Should the ideology of education be changed? For decades, in most European countries the prevailing policy has been to sprinkle funding across all institutions, as an instrument of regional development. The idea that one university is better than another – and thus should get more of the money – was heresy. That has hurt research .
• Should Europe invent the “market-friendly university”? Should universities be transformed into institutions with the management and desire to work with industry? Innovation cannot be a bolt-on to existing structures, driven solely by the technology transfer office; it requires an outward-facing, business-friendly, professional and systematic approach.
• What is the role of public-private partnerships? Getting the right brains into business is the joint responsibility of both private organizations and Universities. Business has a significant role to play in moving towards a demand-led system of skills development, whereby skills requirements are clearly articulated and education and training programs reoriented to fit with that demand.

Further readings
• Science, Technology and Innovation in Europe, 2006. http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-76-06-203/EN/KS-76-06-203-EN.PDF
• OECD Science, Technology and Innovation Scoreboard: Innovation and Performance in the Global Economy, 2007.
• Accenture (2007), Skills for the Future. A report produced for the Lisbon Council (EU). 2007. https://www.accenture.com/NR/rdonlyres/2EE74933-2694-4FDD-A53C-EED8E6E5ECBA/0/SkillsfortheFuture.pdf.
• European Commission (2006), Creating an Innovative Europe, (Aho Report), Report of the Independent Expert Group on R&D and Innovation appointed following the Hampton Court Summit and chaired by Mr. Esko Aho. http://ec.europa.eu/invest-in-research/
• Innovation: The Demand Side, New Ways to Create Markets and Jobs in Europe, Science-Business, 2007 (www.sciencebusiness.net)
• “Innovating at the Top: How Global CEOs Drive Innovation for Growth and Profit”, Palgrave Macmillan, 2008. (Authored by Roland Berger, Soumitra Dutta, Geoffrey Samuels and Tobias Raffel)

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