This is why Europe is losing the race for technological innovation

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BRUSSELS – The topic of Europe’s competitiveness crisis has been on the agenda for some time. The first cries of alarm date back to the last decade, when the European Union was dealing with the fallout of the financial crisis. Then came the pandemic. Since then, member countries and the European Commission have increased investments in order to recover lost ground. But how effectively? A newly published report suggests that at this rate Europe will never have its own GPT Chat.

“The European Union is losing the innovation race, giving up economic well-being and regulatory and geopolitical influence. Its total absence in the group of the top 20 technology companies and the top 20 start-ups is disturbing”, explains Jean Tirole, Nobel Prize winner and president of the Toulouse School of Economics, one of the three institutions, together with the IFO Institute of Monaco and the Bocconi University, for having prepared a merciless x-ray of the European situation.

Let’s start with the numbers. On the public front, investments in Research & Development are today at American levels, around 0.7% of gross domestic product. On the private side, however, the delay is notable. According to the report, corporate spending is 1.2% of GDP, compared to 2.3% in the United States. There’s worse. While Americans spend in the most innovative fields, i.e. the great digital world, Europeans continue to invest in the more traditional sectors.

A table published in the report, a volume of more than 50 pages, is extraordinarily significant. In 2003 the main investors in the United States were Ford, Pfizer and General Motors, as well as in Europe they were Mercedes-Benz, Siemens and Volkswagen. In 2022, while the European list remained unchanged (Bosch had replaced Siemens), across the Atlantic Alphabet, Meta and Microsoft had risen to prominence, displacing the car manufacturers.

“The European Union’s comparative advantage in the automotive sector – note the researchers in the report published today, Wednesday 10 April – is worrying: despite massive investments in R&D, the European automotive industry still risks being overtaken by US producers, and also from the Chinese ones. Foreign manufacturers can leverage their leadership in electric and autonomous driving technologies.”