Innovation in Europe lacks 'creative destruction': Report

Book review - Innovation in Europe lacks 'creative destruction': CER report states

Opinion piece (EurActiv)
08 September 2011

European innovation policies lack the "creative destruction" widely accepted in the US, raising barriers for businesses seeking to find new ideas and applications, according to a report compiled by the Centre for European Reform, a British think-tank.

 In the report, entitled 'Innovation: How Europe can take off', a series of academics give their opinions on Europe's approach to innovation policy and how it can be improved.

The report's authors all broadly agree that innovation is not the same as research and development. Increasingly, it has also become a democratic process with consumers which is likely to contribute ideas as much as entrepreneurs and scientists.

Academics writing for the report claim that "creative destruction" – a process which requires old ideas and methodologies to be cleared away – is a prerequisite for innovation, whereas policymakers are more likely to be in favour of maintaining existing systems and incumbent companies.

One of the report's editors, Philip Whyte, says in the introduction: "Policymakers, particularly in Europe, want to have their cake and eat it: they want innovation, but without the accompanying economic dislocation and social disruption."

Albert Braco Biosca, a senior economist at the National Endowment for Science, Technology and the Arts, says in the report that the EU has less creative destruction than the US because there is less "churn" – the rate at which companies enter and depart the market.

The report claims that there is a fundamental problem surrounding the definition of innovation, even though the term is touted as the key to future economic growth. The report says that many innovations, such as those connected to the Internet, are often unproductive in the sense that they fail to generate much income.

It also says that innovations can be dangerous, claiming that it was the high level of innovation within the financial sector that laid the foundations for complex transactions that underlay the financial crisis.