R&D expenditure and innovation in the EU and selected member states.

• Author: Pelikanova, Radka MacGregor

INTRODUCTION

For more than two decades, the EU has been proclaiming its ambition to become the most competitive and innovation-oriented economy in the world (EC, 2010) and its recognition that intellectual property (IP) is indispensable for that. IP involves intangible assets typically benefiting by industrial property protection, such as patents for inventions, and by copyright protection, such as a copyright for a creative and materialized idea, including software. The current EU strategy, called Europe 2020, sets as one of its five targets a threshold of at least 3% of the EU's gross domestic product (GDP) to be invested in research and experimental development (R&D) in 2020. R&D comprises creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society and the use of this stock of knowledge to devise new applications (OECD, 2015). Europe 2020 states that the satisfaction of a 3% threshold will inevitably lead to a boost in the competitiveness of the EU and EU businesses, especially the setting (EC, 2010) in line with the growth of corporate social responsibility (Paksiova, 2016). The EU seems confident that the increase in spending on R&D will generate a rise in innovations. However, neither the EU and its representatives nor academia have been able to analyze, verify and explain the 3% threshold and this co-relation and its components in depth. It appears that they simply observe the increase of competitiveness in economies where the 3% threshold is targeted (USA) or even surpassed (Japan).

Inventions are vital for competitiveness in the 21st century (Terzic, 2017). They are products of costly processes requiring education and knowledge efficiency (Polcyn, 2018) along with direct and indirect financing and can lead to innovation, but this line is far from straight forward. Since an innovation means developing a new idea and putting it into the business (Kalanje, 2018), spending more money on R&D can, but not necessarily, lead to innovations. On the one hand, many research projects wind up as dead ends, despite the amount of money spent. On the other hand, some ideas come at basically no cost and can lead to wonderful innovations. Since the quantification of the threshold of 3% is a mere following of patterns in different societies, economies and culture, the Europe 2020 confidence seems surprising--how can the EU be sure that the 3% threshold is going to be met in 2020 and that this will result in more innovations and increased competitiveness?

Hence, three critical and, so far, not fully answered research questions at the EU level and the EU member state's level emerge--(i) how much is spent on R&D, (ii) how many patentable inventions are filed and succeed and how many other ideas lead to innovations, and (iii) can we imply a possible relationship and what are the trends? The general claims about difficulties to assess R&D spending and its trends and about the intangible nature and quantification impossibilities of inventions (MacGregor Pelikanova, 2014), patentable or copyrightable, along with the misunderstanding of the casual nexus line spending-idea-innovation do not justify the omission of appropriate studies and publications. Their lack excludes a deeper understanding and negatively impacts further work towards making the EU setting for innovation more effective and efficient. This vacuum is to be addressed while appreciating the dynamic interaction between spending and innovation at both the EU level and selected EU member state's level within the time period of Europe 2020. The stable and uncontestable starting premises are that Europe 2020 demands 3% of GDP to be spent on R&D by 2020, that ideas produced by R&D can be predominantly patentable inventions or ideas usable in the digital environment (Polanski, 2015), and that there is a certain link between R&D and innovation.

The aim of this paper and the rationale for the study are bound to three research questions with respect to Europe 2020, namely the EU and selected EU member states. Firstly, what fraction of GDP is allocated to R&D and what is the trend? Secondly, how many applications were filed for patents on inventions, how many patents were granted, what was the success rate, how has digitalization progressed, and what are the trends? Thirdly, can we imply the possibility of a relationship and what are the trends? All three research questions deal with under-researched and not deeply analyzed issues and aspects which often, due to their intangibility, complexity and impossibility of straight quantitative measuring, are avoided and/or simplified. The EU believes in an automatic increase in innovation due to an increase in spending without offering any hard data, or at least critical elaborated analyses, to back up this supposition. Academic literature deals statically with individual aspects and issues in this arena but does not offer a holistic Meta-Analysis attempting to bridge the gap between these elements and to understand their interaction in their own context, as well as in the time context expressed by trends. In sum, there are no dynamic studies attempting to describe and critically assess this intangible mechanism. This is deplorable because such a description and assessment are do-able. There is relevant data, even official and hard, which make this pioneering study and very original paper possible and scientifically grounded. It provides semi-conclusions vital for the EU, Europe 2020 and European endeavor working with probably the biggest assets of Europeans--their creativity and values translated into innovations.

LITERATURE BACKGROUND

Our post-modern, highly competitive, global society depends upon the use of information systems and information technology (IS/IT) (MacGregor Pelikanova, 2013) and consequently on the development and implementation of new technologies. In many aspects, the innovation process matches various already well-described project life cycles which are divided into several stages including initiation, planning, preparatory execution, real execution and closure (Siemieniako & Gebarowski, 2016).

Since innovations have become an integral part of policies to promote growth (Billon, Marco, & Lera-Lopez, 2017), the question of the effective and efficient setting of these policies (Tureckova & Nevima, 2017) and their financing emerged. Financial support for R&D is both necessary and limited, not only by public and private budgetary constraints, limited public budgets and other public factors (Blind, Petersen, & Riillo, 2017) but also by other challenges embedded in modern technologies (Stanickova, 2015; Melecky, 2013). On one hand, it is assumed that R&D needs to be financed and that it should lead to innovation activities leading to the transposition and implementation of new technologies in the modern e-business setting and operation (Polanski, 2015). On the other hand, this process includes a myriad of risks and often ends with deadlock. Empirical studies confirm that just a fraction of innovation activities lead to practical results and suggest that often private sector creativity (Zollo, Rialti, Ciappei, & Boccardi, 2018) and the size of the support by private enterprise is pivotal (Damijan, Kostevc, & Rojec, 2017).

The EU is a result of economic and political integration focusing on the internal single market with the quartet of freedom of movement (MacGregor Pelikanova, 2017). The EU has always been dominated more by technocratic than political institutions (Lianos, 2010) and the supranational approach has prevailed over the intergovernmental approach. Therefore, the current EU strategy, i.e., the EU strategy for 2010-2020 (Europe 2020) is a supranational, technocratic planning project which sets an impressively ambitious strategic goal "to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth" (EC, 2010). Europe 2020 is determined to reach this goal via three mutually reinforcing priorities--smart, sustainable and inclusive growth, translated into five headline targets and seven flagship initiatives.

Europe 2020 was issued in 2010 and is marked by economic and other crises issues and by the slump of economic indicators back to 1990s levels (Colak & Ege, 2013). Despite this rather deplorable setting, the EU leadership, led by the Barroso Commission, became confident that the EU can, under the auspices of Europe 2020 attain an even higher rate of economic growth than in the US (Balcerzak, 2015).

For the EU and EU policies, such as the European Cohesion Policy, innovation and the use of IS/IT are pivotal (Billon et al., 2017). Europe 2020 deals specifically with R&D, innovations and digitalization by including them across its five targets. The idea behind it is that economic growth is to be achieved by innovation in the digital environment (Terzic, 2017), which should be the result of the synergy of various EU and EU member state's policies (Kordos, 2016). In sum, the Barroso European Commission was convinced that without proper R&D spending, the EU would lose any chance to be amongst the world (economic) leaders (Walburn, 2010).

In 2010, R&D spending in the EU reached only 1.9% of GDP, while the rate in the US was 2.6% and in Japan 3.4% (Eurostat, 2018). The Barroso Commission was over-confident that 3% was do-able and key for the digital innovation dominance of the EU in 2020 (EC, 2010). However, eight years later, the reality seems to be different and instead of a dramatically growing trend from 1.9% to 3%, a rather stagnating trend barely passing 2% is to be observed at the EU level (Eurostat, 2018). Few studies and analyses have been published about it and its trends; and the reasons (EC, 201; 8b), along with its consequences, are even more obscure in the focus of the academic press (De Noni, Orsi, & Belussi, 2018; Dima, Begu, Vasilescu, & Masen...