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Europe

Europe invests in the future

European companies aim to set themselves apart by focusing on research and development. But despite a new R&D funding jump, Europe lags behind the United States when it comes to high-impact research.

Europeis groaning under the weight of the financial crisis. While the European Union searches for answers, European businesses are developing their own ways of coping and staying competitive. Their motto is to invest more in research and development - despite the crisis.

A computer and robot Photo: Britta Pedersen dpa/lbn

The computer industry expects a large jump in R&D spending

A study conducted by the European Union found that leading companies plan to increase their investments by an annual average of four percent by 2014. Companies in the computer and software branch are digging particularly deep into their pockets. They estimated an average increase in investment of 11 percent per year.

"This positive trend for corporate R&D investment is essential for European competitiveness," said European Commissioner for Research, Innovation and Science Maire Geoghegan-Quinn.

Dangers of ending research

The news was also reassuring to Oliver Koppel of the Cologne Institute for Economic Research, because "it shows that companies, even in difficult economic times, are investing in research and development."

The financial crisis has, however, also uncovered what happens when countries cut R&D investment, as Greece, Italy and Spain have all done over the past 10 years. Since research is one of the main drivers of economic development, "it's no wonder that these countries are not doing so well unfortunately," Koppel told DW.

Máire Geoghegan-Quinn, Photo: Press photo from the EU Commission

Europe can't afford to fall behind, said Geoghegan-Quinn

But the positive results of the EU's study should not be exaggerated. The poll concentrated on large companies that plan their research and development budgets over the long term. So far, the euro crisis has not had as much of an effect on them.

"The economic crisis has had a much larger effect on small and medium-sized businesses that have to operate more on their cash positions," Koppel said, adding that the survey's results cannot necessarily be applied to overall investment in research and development.

Spurring on ideas

One way of supporting companies' willingness to innovate, Koppel suggested, would be for the EU to push for tax breaks in its member states. If a company knew that investing 1,000 euros ($1,255) in research and development would lead to a 250-euro tax write off, it would be extremely effective, Koppel argued.

Oliver Koppel, Press photo: Dr. Oliver Koppel Senior Economist Humankapital und Innovation Institut der deutschen Wirtschaft Köln

Koppel said R&D funding is a driver for a country's economy

Large companies' current willingness to invest could prove key to an economic turnaround. In mid-2010, the Organization for Economic Cooperation and Development (OECD) reported that the United States and Japan had set themselves ahead of other market competitors.

No time to rest

Geoghegan-Quinn has warned companies not to let up on their plans for R&D investment. "Europe leads in many fields, but we can't afford to be complacent," she said at a press conference in July.

A VW logo with Chinese writing below it on a large sign. Photo: Gero Breloer dpa/lnw +++(c) dpa - Bildfunk+++

VW has profited from its growing trade with China

"We produce more scientific publications than the US, but our publications are less frequently cited than theirs. In other words, we are falling behind when it comes to the very best research with the highest impact," she added. "And, of course, competition is intensifying all the time, as China and emerging economies enter the race."

European companies are also profiting from globalization. Not only because the market for European products has expanded - China is currently a major market for Europe - but also because of international research and development cooperation efforts among companies. Radu Popescu-Zeletin, head of the Fraunhofer Institute for Open Communication Systems, has looked into the issue.

"Is it possible in today's world to find borders between Europe and China?" he asked. "Very many Chinese firms have invested relatively large sums in European firms, which for their part trade with China. I think that these days, the supposed fight is actually more a collaboration."

Limits to cooperation

But in recent years this cooperation has often been limited, due to problems with protecting intellectual property. Chinese firms frequently do not take a very exacting view of copyrights for foreign ideas. It is thus no accident that in the EU's R&D study, European firms complained about large expenses they have to pay to protect their intellectual property.

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