Europe’s Middle-Technology Trap
ECONOMIC POLICY AND ITS IMPACT
Key Messages
- The Lisbon strategy of the year 2000 failed: the share of R&D spending in Europe remains below the 3 percent of GDP target, far behind that of the US and China
- EU companies spend much less on R&D than their US peers and concentrate their innovation activities on midtech instead high-tech industries. Mid-tech sectors, however, tend to have lower growth rates and generate incremental innovations rather than large, disruptive ones
- Consequently, Europe currently lags in high-tech sectors (IT hardware, software, biotechnology, pharmaceuticals) and is losing ground to the US in terms of productivity, competitiveness, and economic growth
- EU funding for innovation is too small and needs reforms to focus more on disruptive leap innovations that foster business dynamics
Abstract
Companies in the EU spend much less on R&D than their competitors in the US and focus their innovation activities on mid-tech rather than high-tech sectors (IT hard-ware, software, biotechnology, pharmaceuticals). Reforms of EU innovation policy are necessary to avoid the “mid-tech trap,” i.e., the traditional dominance of the same companies, especially from the automotive sector.
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Citation
Anita Dietrich, Florian Dorn, Clemens Fuest, Daniel Gros, Giorgio Presidente, Philipp-Leo Mengel and Jean Tirole: “Europe’s Middle-Technology Trap ,” EconPol Forum 25 (4), CESifo, Munich, 2024.