In addition to sector-specific analyses, the Draghi Report formulates horizontal policy proposals to tackle Europe’s competitiveness challenge. Following the same logic than sectoral recommendations, these proposals are designed to be actionable and timely (short-, medium-, and long-term), with the aim of delivering tangible impact on the EU’s strategic and economic trajectory.
Find here our full account of the Report’s analysis of Research & Innovation
Europe’s future prosperity and global competitiveness hinge on its ability to turn research excellence into scalable, market-ready innovation. While the EU excels in scientific output, it fails to translate this strength into economic impact. Structural weaknesses – low private R&D investment, fragmented public funding, underdeveloped innovation clusters, weak digital and financial ecosystems, regulatory barriers, and poor technology diffusion – undermine its innovation performance.
The Draghi Report emphasises the need for the EU to place research and innovation at the core of its strategic agenda. It formulates policy proposals to align and scale its efforts across Member States, focus on excellence and added value, and invest in a dynamic, inclusive ecosystem capable of converting knowledge into global leadership in key technologies.
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Research and innovation (R&I) are fundamental to Europe’s future prosperity, driving productivity growth and societal well-being. Innovation generates positive externalities, with new technologies building upon one another, justifying public intervention to stimulate this dynamic process. As Europe faces demographic ageing and a shrinking labour force, the importance of R&I in sustaining the welfare model and ensuring long-term growth is set to increase.
Innovation is also central to achieving Europe’s green and digital transitions. Nearly one-third of the CO₂ reductions needed to reach net-zero by 2050 depend on clean technologies that are still in demonstration or prototype stages. However, patenting in low-carbon technologies has stagnated since 2010, and current levels of innovation are insufficient to meet climate objectives. High costs remain a barrier to the deployment of key solutions like green hydrogen or alternative fuels, highlighting the role of innovation in bringing down prices and scaling up green technologies. Likewise, innovation in transport and energy is essential for both environmental and competitiveness goals.
The EU plays a leading role in scientific publishing, ahead of the U.S. and second only to China. In high-impact publications, it performs on par with the U.S. but still trails China. While the EU maintains a significant share of global patenting, its position is eroding due to China’s rapid rise. Despite strong research output, Europe struggles to translate this into marketable innovation. Only about 40% of European firms invest in R&I, compared to 56% in the US, particularly lagging in adopting « new-to-the-company » innovations.
Start-up creation in Europe is growing, but scale-up remains a bottleneck. As a result, the EU has far fewer unicorns than the US, and many promising start-ups relocate abroad. The continent also has fewer R&D-intensive firms, with only 12 European companies among the world’s top 50 R&D investors, versus 22 in the US.
Europe maintains strengths in green technologies, advanced manufacturing, and automotive and biotech sectors. However, it lags behind in digital fields such as artificial intelligence, cybersecurity, blockchain, and quantum computing. Given the horizontal role of digital technologies across sectors, this gap risks undermining broader industrial competitiveness.
While Europe produced 30% of global green inventions between 2016 and 2021, this lead is under threat as China quickly catches up. Moreover, the EU risks falling into a “middle technology trap,” as most innovation occurs in medium-tech sectors. Unlike the U.S., which has seen its R&D champions evolve over time, the EU’s top R&D spenders have remained largely unchanged and concentrated in traditional industries like automobiles.
The EU underinvests in R&D compared to global peers, spending only 2.24% of GDP in 2022, well below its 3% target. The private sector is the main source of this shortfall, contributing just 1.3% of GDP, compared to 2.4% in the U.S.. Only five EU countries meet the 3% benchmark, and disparities across Member States are stark. The EU’s industrial structure, dominated by medium- and low-tech sectors, explains much of the private R&D gap. Even in comparable sectors, European firms spend less on R&D than their US counterparts.
Although public R&D spending in the EU is relatively high (0.74% of GDP), it is fragmented, often poorly aligned with EU-wide priorities, and hard to access. Most public R&D funds come from national budgets, with limited coordination at the EU level. The Horizon Europe programme, while significant in size, suffers from a lack of focus, overly complex procedures, and underinvestment in breakthrough innovation. The European Innovation Council, meant to support disruptive innovation, is underfunded and poorly structured compared to US counterparts like DARPA.
The example of CERN illustrates what coordinated, EU-level investment can achieve. Its successes – ranging from the World Wide Web to the Higgs Boson – underscore the benefits of pooling resources and fostering scientific excellence across borders.
Collaboration across European borders in R&I remains limited. Most patent co-ownership occurs within regions or countries, with only 13% spanning different Member States. In contrast, cross-state collaboration is much higher in the U.S.. Building EU-scale research infrastructure is critical, but national constraints and lack of coordination limit progress.
The governance of R&I is dispersed across multiple layers – EU, national, regional – and across diverse ministries, undermining strategic focus and coherence.
While the EU’s university system is inclusive and broadly effective, it lacks world-leading institutions. Only four EU universities rank among the global top 50, and just three research institutions appear in the top 50 of the Nature Index. Weak governance, limited autonomy, bureaucratic constraints, and lack of competitive salaries and facilitieshamper the EU’s ability to attract and retain top researchers.
Linkages between academia and business are also weak. Technology Transfer Offices are under-resourced, and intellectual property management varies widely across institutions. Researchers often lack financial incentives to commercialise their work or pursue entrepreneurial careers.
Europe hosts many innovation clusters but lacks truly global leaders. Only Paris ranks among the top 20 global science and technology clusters. By contrast, the U.S. and China dominate the top ranks with clusters focused on digital and biotech sectors. EU clusters tend to concentrate in traditional industries, and often lack proximity to elite universities or research institutions that drive breakthrough innovation.
Europe’s innovation financing ecosystem remains underpowered. Debt financing dominates, while equity financing – critical for early-stage and high-risk ventures – is underdeveloped. Angel investment and venture capital (VC) remain weak compared to the U.S.. The EU’s VC market represents just 0.05% of GDP, versus 0.29% in the UK and 0.32% in the US.
The lack of large-scale VC funds limits scale-up potential, and fragmented national markets reduce demand for VC. Consequently, many successful EU start-ups rely on foreign capital markets, often relocating as a result.
Regulatory fragmentation, high restructuring costs, and overly cautious rules hinder innovation in the EU. Legal, tax, and administrative inconsistencies across Member States restrict companies’ ability to scale. The EU also struggles to attract and retain entrepreneurial talent.
Commercialisation of research remains weak, with only a third of university and RTO patents being exploited. SMEs in particular underutilise intellectual property protections, deterred by complexity, cost, and lack of expertise.
Slow technology adoption – especially among SMEs – limits productivity gains. Firm size, weak digital infrastructure, and skill shortages are the main barriers. The digital gap with the U.S. is especially marked among smaller firms, further dragging on EU-wide innovation diffusion.
Research and innovation (R&I) are fundamental to Europe’s future prosperity, driving productivity growth and societal well-being. Innovation generates positive externalities, with new technologies building upon one another, justifying public intervention to stimulate this dynamic process. As Europe faces demographic ageing and a shrinking labour force, the importance of R&I in sustaining the welfare model and ensuring long-term growth is set to increase.
Innovation is also central to achieving Europe’s green and digital transitions. Nearly one-third of the CO₂ reductions needed to reach net-zero by 2050 depend on clean technologies that are still in demonstration or prototype stages. However, patenting in low-carbon technologies has stagnated since 2010, and current levels of innovation are insufficient to meet climate objectives. High costs remain a barrier to the deployment of key solutions like green hydrogen or alternative fuels, highlighting the role of innovation in bringing down prices and scaling up green technologies. Likewise, innovation in transport and energy is essential for both environmental and competitiveness goals.
The EU plays a leading role in scientific publishing, ahead of the U.S. and second only to China. In high-impact publications, it performs on par with the U.S. but still trails China. While the EU maintains a significant share of global patenting, its position is eroding due to China’s rapid rise. Despite strong research output, Europe struggles to translate this into marketable innovation. Only about 40% of European firms invest in R&I, compared to 56% in the US, particularly lagging in adopting « new-to-the-company » innovations.
Start-up creation in Europe is growing, but scale-up remains a bottleneck. As a result, the EU has far fewer unicorns than the US, and many promising start-ups relocate abroad. The continent also has fewer R&D-intensive firms, with only 12 European companies among the world’s top 50 R&D investors, versus 22 in the US.
Europe maintains strengths in green technologies, advanced manufacturing, and automotive and biotech sectors. However, it lags behind in digital fields such as artificial intelligence, cybersecurity, blockchain, and quantum computing. Given the horizontal role of digital technologies across sectors, this gap risks undermining broader industrial competitiveness.
While Europe produced 30% of global green inventions between 2016 and 2021, this lead is under threat as China quickly catches up. Moreover, the EU risks falling into a “middle technology trap,” as most innovation occurs in medium-tech sectors. Unlike the U.S., which has seen its R&D champions evolve over time, the EU’s top R&D spenders have remained largely unchanged and concentrated in traditional industries like automobiles.
The EU underinvests in R&D compared to global peers, spending only 2.24% of GDP in 2022, well below its 3% target. The private sector is the main source of this shortfall, contributing just 1.3% of GDP, compared to 2.4% in the U.S.. Only five EU countries meet the 3% benchmark, and disparities across Member States are stark. The EU’s industrial structure, dominated by medium- and low-tech sectors, explains much of the private R&D gap. Even in comparable sectors, European firms spend less on R&D than their US counterparts.
Although public R&D spending in the EU is relatively high (0.74% of GDP), it is fragmented, often poorly aligned with EU-wide priorities, and hard to access. Most public R&D funds come from national budgets, with limited coordination at the EU level. The Horizon Europe programme, while significant in size, suffers from a lack of focus, overly complex procedures, and underinvestment in breakthrough innovation. The European Innovation Council, meant to support disruptive innovation, is underfunded and poorly structured compared to US counterparts like DARPA.
The example of CERN illustrates what coordinated, EU-level investment can achieve. Its successes – ranging from the World Wide Web to the Higgs Boson – underscore the benefits of pooling resources and fostering scientific excellence across borders.
Collaboration across European borders in R&I remains limited. Most patent co-ownership occurs within regions or countries, with only 13% spanning different Member States. In contrast, cross-state collaboration is much higher in the U.S.. Building EU-scale research infrastructure is critical, but national constraints and lack of coordination limit progress.
The governance of R&I is dispersed across multiple layers – EU, national, regional – and across diverse ministries, undermining strategic focus and coherence.
While the EU’s university system is inclusive and broadly effective, it lacks world-leading institutions. Only four EU universities rank among the global top 50, and just three research institutions appear in the top 50 of the Nature Index. Weak governance, limited autonomy, bureaucratic constraints, and lack of competitive salaries and facilitieshamper the EU’s ability to attract and retain top researchers.
Linkages between academia and business are also weak. Technology Transfer Offices are under-resourced, and intellectual property management varies widely across institutions. Researchers often lack financial incentives to commercialise their work or pursue entrepreneurial careers.
Europe hosts many innovation clusters but lacks truly global leaders. Only Paris ranks among the top 20 global science and technology clusters. By contrast, the U.S. and China dominate the top ranks with clusters focused on digital and biotech sectors. EU clusters tend to concentrate in traditional industries, and often lack proximity to elite universities or research institutions that drive breakthrough innovation.
Europe’s innovation financing ecosystem remains underpowered. Debt financing dominates, while equity financing – critical for early-stage and high-risk ventures – is underdeveloped. Angel investment and venture capital (VC) remain weak compared to the U.S.. The EU’s VC market represents just 0.05% of GDP, versus 0.29% in the UK and 0.32% in the US.
The lack of large-scale VC funds limits scale-up potential, and fragmented national markets reduce demand for VC. Consequently, many successful EU start-ups rely on foreign capital markets, often relocating as a result.
Regulatory fragmentation, high restructuring costs, and overly cautious rules hinder innovation in the EU. Legal, tax, and administrative inconsistencies across Member States restrict companies’ ability to scale. The EU also struggles to attract and retain entrepreneurial talent.
Commercialisation of research remains weak, with only a third of university and RTO patents being exploited. SMEs in particular underutilise intellectual property protections, deterred by complexity, cost, and lack of expertise.
Slow technology adoption – especially among SMEs – limits productivity gains. Firm size, weak digital infrastructure, and skill shortages are the main barriers. The digital gap with the U.S. is especially marked among smaller firms, further dragging on EU-wide innovation diffusion.