Innovation and Competitiveness among EU Goals for Knowledge Economy. (Perspectives)

European Union will be world's largest free-trade zone by end of decade, when it completes its planned expansion from 15 countries with 375 million people to 27 countries with 500 million people. At same time, it is determined to make itself the most competitive and dynamic economy in world, according to EU leaders who attended Lisbon summit meeting of European Council in March 2000. Newspapers and magazines offer a decidedly bullish view of general economic outlook for EU over next decade. This reflects a number of positive economic developments, including: * old and economies are rising together. * Successful corporate restructuring is underway. * Substantial tax cuts have been made, particularly in Germany, France and Italy. * Unemployment is lowest in ten years. * labor market has become more flexible. * Privatization of state-owned monopolies continues, including telephone and electric companies. introduction of euro has provided a significant boost for development within EU. transparency of euro has opened way for aggressive price competition, and euro has made it easier for companies to raise capital. Twelve EU countries (Euro-zone) outside of United Kingdom, Sweden and Denmark have adopted euro. Eighty percent of Europe's trade is done within Euro-Zone, making this a strong and essentially self-sufficient economic alliance. It is interesting to observe similarity between United States and Euro-Zone on important economic dimensions listed in Table 1, page 4. most significant outcome of all of political and economic initiatives taken over past 50 years is progress toward becoming a single market. It should be recognized that almost all trade barriers within EU have been abolished. Supporting Cultural Factors Two important cultural factors will influence technical and economic competitiveness of Europe: computer literacy of its population and willingness to support and engage in entrepreneurial ventures. With regard to first, EU leaders at Lisbon summit pledged to transform Europe into world's most computer-literate society by 2010. Since then, percentage of households connected to Internet increased from 18 to 30 percent. In Denmark and Netherlands, more than half of all households are now on line, which surpasses 41-percent level in United States. An indication of continuing growth in IT sector is that IBM Europe grew at 18 percent annually in 2000 while IBM U.S. grew at 8 percent. With regard to entrepreneurship, U.S. culture of risk-taking still outpaces European culture. This is evident from measurements of: rate of new company formation, high-tech business activity, business investment in new assets, business spending on R&D, and number of initial public offerings backed by venture capital. There are signs of change in Europe, but it is very early in process. Esther Dyson, a long-time observer of international technology and venture capital scene, identifies difference in cultures quite well: The American attitude is let's make a few mistakes because we will learn from them. tendency in Europe is to wait for enabling legislation. Technical and Innovation Initiatives Fifteen years ago, EU did not have a technology policy. Since then, a number of initiatives have been tried--but with little commercial success. There were, however, positive outcomes from these early activities: * Networks of organizations from many countries have been created. * Cross-fertilization of ideas has strengthened Europe's scientific base. * education and training of young scientists and engineers has been strengthened. …