TOWARDS A COMPREHENSIVE EU INNOVATION POLICY

While there is a large body of EU innovation policy to build on, the EU’s conception of innovation fails to take account of the true breadth of innovative activities and processes that can contribute to societal progress. There has been an unfortunate failure to understand that support for innovation is not the same as support for R&D. Innovation cannot be organised by decree. It comes from people, and only people. Innovation is neither an explicitly economic process, nor indeed an objective itself. It is instead a way of working that can be used to achieve social, economic and environmental goals. 

Pursuing a new approach to innovation policy requires a much more complete understanding of innovation itself. The term innovation is most often used to refer to the process of producing and putting in place something new, be it a product or process. In most discussions, innovation is seen as a single thing, process or concept, often scientific, technical and/or R&D focused with scientific or economic objectives. In truth an innovation can be almost anything  for example new ways of communicating such as blogs, new forms of government such as neighbourhood forums, or new products such as the ipad.

By remaining focused on new products and technologies as key outcomes of innovation, EU innovation policy has failed to capture the significant and widespread social, economic and environmental impacts of less tangible innovations such as organisational changes. It has also contributed to confusion. Technology for example, is both an outcome of innovation and a way of achieving innovation. In reality the end product of social, market or public innovation may be a new technology or process, and on the other hand, technology can be used to achieve outcomes in social, market or public innovation.

EU innovation policy should not fixate on a particular type of outcome such as technology or patents. It should instead be based on a clear objective to support actions of all types that will lead to innovative ways of addressing both existing problems such as energy efficiency in local housing and future unknown societal needs.

1. Market innovation: Market innovation is the first of three innovation types that should form the pillars of EU policy. This refers to the development of products and services to improve economic performance be it productivity, profit, employment or GDP growth. This is the main focus of the EU‘s current innovation policy and is seen as particularly important to move the economy from recession to recovery, focusing on the need to improve EU global competitiveness. Rarely developed in the public or third sector, it is the private and research sectors that are dominant. There is little doubt that such traditional, market-oriented innovation will be an important basis for responses to strategic challenges. The development of products in the private and research sectors will inevitably have substantial impacts on our wider society. Yet market innovation with its emphasis on profit maximisation fails to take advantage of the potential for innovation held across society.
2. Social innovation: Social innovation is therefore a vital complement to market innovation. Put simply, social innovation refers to new ideas, institutions or ways of working that aim to fulfil unmet social needs or tackle social problems. Whereas market innovation relies on research institutes, universities and private enterprise, social innovation is predominantly developed and diffused through organisations whose primary purposes are social. By developing an innovation policy based on social innovation, the EU would be in a position to take advantage of the skills, knowledge and insight held by numerous community, voluntary, charitable and social organisations. Such organisations currently operate in innumerable settings, developing innovative ideas and ways of working based on real societal need, as opposed to top-down policy drivers. On first analysis the link between social and market innovation seems process rather than outcome based  both rely on new ideas working successfully, but for apparently very different outcomes. Yet social innovations can have numerous impacts similar to those of market innovation.
3. Public Innovation: Public innovation refers to new ideas that work at creating public value. The public sector comprises large organisations with substantial human, physical and economic resource and is key in this element of innovation. Cities, regions and other forms of government or public sector organisation are constantly innovating in order that they can provide better services, achieve targets across all policy areas, tackle challenges and take advantage of opportunities in areas as diverse as child poverty and climate change adaptation. Relatively bureaucratic drivers such as the need for greater public sector efficiency and cost effectiveness post-recession simply add to the drivers for public innovation. A key challenge to effective public innovation is the dichotomy between short-term targets and long-term objectives, as organisations with short-term horizons may be reluctant to embrace change or risk. Other hurdles include organisational cultures that shun innovation, or lack of experience in learning from outside organisations . Given that public innovation is often driven primarily by the need to improve poor performing public services in response to changing social needs, the pressures exerted by the recession and socio-economic challenges mean that public innovation will be vital. The EU can play an important role in facilitating this by encouraging partnership working across sectors, facilitating networking, changing public sector cultures and of course providing resource.

Localising innovation policy

Given the broad nature of total innovation, policy should not be based on a top-down approach. Indeed given that local and regional levels deliver around 70% of all European policy, a bottom-up approach seems logical . Policy should be built from the local level, taking advantage of local expertise and experience. It is after all at the local level that the actors involved in social, public and market innovations operate, and where the strategic challenges in need of innovative responses are most keenly felt. At the same time, regional and local governments deliver a majority of public services across the EU and manage considerable public spending. Towns, cities and regions are home to and have close relationships with almost all actors or stakeholders relevant to innovation. These include SMEs, entrepreneurs, research institutes, universities, social enterprises and community and voluntary organisations.

Local authorities are vital beyond their role as home of innovators. Administrations are constantly supporting and indeed undertaking innovation in a range of issue areas. They use cross-cutting processes and tools to support or promote innovation, and are vital in underpinning successful local innovation strategies. Such success is based not on top-down policy, but the relationships between a locality’s assets including location, infrastructure, skills base, and institutions, for example, universities, NGOs, government and businesses. It is possible to highlight a series of core areas in which local administrations undertake activities to support and drive forward innovation.

Local authorities as service providers

First, administrations perform a critical role as service provider to millions of residents, businesses and organisations across the EU. Indeed they provide services in the most direct manner to underpin the work of all actors involved in innovation. By providing support, advice and training to SMEs and other businesses, local administrations and their partners contribute to private sector stability and capacity, in turn boosting the potential for economic prosperity and growth. This is reflected in the provision of lifelong learning and training to residents and employees. Knowledge is of course vital to the modern economy in Europe, and without local public sector support, large numbers of workers would have no access to the skills needed to participate in the knowledge economy.

Local authorities facilitating innovation

An important factor underpinning the success of local administrations in supporting innovation is that they are in a unique position to act in the best interest of a locality and its stakeholders, as opposed to favouring particular sections or elements. Administrations work across sectoral divisions, gathering and interpreting intelligence and data, appreciating the number and variety of organisations and actors operating in the area at a given time. The result is that they are uniquely positioned to intervene to facilitate innovation. A natural consequence of such impartiality is the ability to convene and lead partnerships. Indeed this is central to the local remit, as they have the representative authority, legitimacy and strategic overview necessary to bring together partners from across sectors to work together towards common goals. The impact on innovation has the potential to be large, given the need for interaction between stakeholders for truly effective innovation to take place.

Due to their position as service and infrastructure providers, local level administrations are uniquely able to lead on or put in place pilot projects to test new ideas and solutions across all thematic areas. It is towns and cities therefore that are prepared to not only provide support for innovators, but also put end products into practice. This can be done on variable scales at the local level, none of which can be achieved through top-down EU policy or interventions alone.

Local authorities, governance and infrastructure

In the widest sense, local administrations put in place the framework within which innovation takes place. They develop and implement public policy for the common good, in turn shaping, promoting or indeed hampering innovation. For example, setting spatial planning or housing policies in a particular way can heighten the need for innovative solutions to challenges such as energy efficiency in housing. As major purchasers, administrations are also able to foster innovative approaches to challenges by setting strict procurement requirements, often acting as first markets for new products as has been the focus of past innovation policy.

Authorities also own substantial numbers of properties, in numerous forms. The result is a base of physical infrastructure that can be adapted easily, developed quickly or have its use changed when appropriate. Local administrations are able to provide premises for all stakeholders from entrepreneurs to charitable organisations engaged in innovation, with incubators and low rent properties being popular products.  

Conclusion  

Given the broad social, economic and environmental issues facing the EU today, an EU innovation policy must not simply be economic, market or technology focused. It must reflect the way in which innovation is a process to achieve the core objectives of the EU, rather than seeing innovation as an end goal in itself. It should also reflect the three main types of innovation that can lead to solutions for shared challenges:  market, public and social  as well as differing methodologies including technological and non-technological. In doing so the EU policy could frame a coherent set of enabling measures not simply for Universities or business. This would allow for a much better integration of central and sectoral policies, leading to increased clarity and outcomes.

In order to best facilitate effective innovation, European policy and associated action plans should explicitly recognise and promote the role of the local level in all aspects of innovation. Local authority involvement in policy planning and implementation at the national and EU levels will ensure that strategic policy frameworks are based on collective knowledge of real problems and opportunities. Such a bottom-up approach would also lead to the needs and wishes of locally-based innovation actors being better accounted for in policy. Beyond these fundamental changes in approach, there are specific actions that can be put in place at the European level to improve the efficacy of existing policies and associated funding programmes.

Local administrations and the multi-sectoral stakeholders involved in innovation could be given 'space to innovate‘. This would be a time limited exemption from certain statutory obligations that may be argued to inhibit innovation. Amendments could therefore be made to State Aid, Structural Funds and other EU framework regulations to remove bureaucratic barriers to innovative actions. Examples may include allowing a greater integration of EU funds at the level of implementation, or removing certain areas of intervention from State Aid rules. The result would be easier implementation of projects such as fast broadband, currently inhibited by state aid rules, that could enable all forms of innovation in the future.

Recognising the importance of social innovation and the role of community and voluntary organisations as well as social enterprises in it, the EU could provide greater support through a funding programme on social innovation, echoing the SME focus of the Competitiveness and Innovation Programme. Funding rules and regulations should be extremely simple for projects funded by the programme, allowing organisations with low administrative capacity to benefit. Existing bureaucratic rules that impact heavily on social organisations could also be amended. There is therefore clearly potential for a new style of innovation policy at the EU level. To put this in place will require a rejection of a long standing emphasis on economic and technological outcomes. This will present the Commission with the challenging prospect of better integrating divided sectoral policy, and embracing the local level more than ever before. The question remains therefore, whether words will be matched by deeds.