According to a report by the European Commission, public funding of research and innovation (R&I) acts as a catalyst to boost private R&I activities and overall economic growth.
The study, which reviews existing empirical literature, underlines that the role of public R&I funding is especially important in light of the rapidly changing innovation landscape.
Carlos Moedas, commissioner for research, science and innovation said: “The study demonstrates once again the importance of public investments in research and innovation. Such investments are necessary to boost excellent research and support new forms of radical, market-creating innovation often driven by digitalisation.”
The study was presented during the meeting of the European Research Area and Innovation Committee (ERAC) in Saint Julian’s, Malta.
It found that roughly two thirds of economic growth in Europe can be traced back to innovation. It also estimated that the typical returns for private R&I investment range between 10% and 30%.
Public R&I investment contributes to developing new skills and creating networks that enable stronger knowledge flows. Overall, the returns on public R&I investment are estimated to be around 20%, with returns on EU-funded R&I estimated to be even higher.
The study also examined the factors that contributed to a temporary slowdown in Europe’s productivity. It argued that the digitisation of the economy in the past decades has revolutionised the way in which innovation works and how its benefits are diffused, with a growing concentration of innovation benefits with some key players.