# Council Decision of 6 October 2006 on Community strategic guidelines on cohesion (2006/702/EC), Division 1.2: Guideline: Improving knowledge and innovation for growth

Extent: E+W+S+N.I.

The Community's aims of growth and job creation will require a structural shift in the economy towards knowledge-based activities. This calls for action on a number of fronts: to address low levels of Research and Technological Development (RTD), especially in the private sector; to promote innovation through new or improved products, processes and services which can withstand international competition; to increase regional and local capacities to generate and absorb new technologies (ICTs in particular); and to provide more support for risk-taking.
RTD expenditure as a percentage of GDP has been increasing, but only marginally and, at 1,9 % of GDP, remains well short of the Lisbon target of 3 %. While the shortfall in business investment in RTD remains significant, there are signs that public investment in this field is also coming under pressure. The RTD and innovation gap within and between countries, particularly in relation to business expenditure on RTD, is much bigger than the income gap. While a combination of national and Community initiatives has been undertaken, more action is needed to match business needs with RTD supply from public and private RTD institutions. Europe's innovation gap with other leading economies is widening. Also within Europe, the innovation gap persists, as the Union too often fails to transform knowledge and technological development into commercial products and processes. Cohesion policy can help to address the main problems behind Europe's underperformance in innovation, including ineffective innovation systems, insufficient entrepreneurial dynamism or slow business adoption of ICT.
In this context, it is necessary to enhance national and regional RTD capacities, to support investment in ICT infrastructure, and to disseminate technology and knowledge through appropriate technology transfer and knowledge exchange mechanisms. Awareness-raising to promote a better use of existing RTD potential could be encouraged through regional ‘foresight’ and other regional strategic planning methods, involving regular and systematic dialogue with key stakeholders. It is also important to enhance the RTD absorption capacity of firms, particularly SMEs, through actions to develop skills and competencies; to encourage the creation and exploitation of a larger pool of high-quality research talent in Europe; to increase private and public investment in RTD and innovation; and to encourage RTD partnerships across the different regions of the Union. European Technology Platforms, for example, offer the potential to better tailor research programmes to business needs; cohesion policy can play an important role in supporting implementation of their Strategic Research Agendas across the Union including in less developed regions.
While direct grants remain important, notably in Convergence regions, there is a need to focus on the provision of collective business and technology services to groups of firms, in order to help them improve their innovative activity. Direct grants to individual firms should be targeted at improving the RTD and innovation capacity of the firm, rather than at a temporary reduction of its production costs generating high deadweight effects. This is particularly important in traditional sectors, particularly those exposed to global competition, which need additional efforts in order to remain competitive, as well as in SMEs which often represent the highest source of employment at the regional level. Most importantly, these policies need to be adapted to the particular conditions of each region, and in particular to the needs of SMEs. National, regional, and local strategies should be based on a comprehensive analysis of RTD investment opportunities.
Knowledge and innovation are at the centre of the Community's efforts to promote faster growth and more jobs. Two related framework programmes are proposed at Community level: the Seventh Framework programme for RTD and the Competitiveness and Innovation Framework Programme (CIP). Synergy between cohesion policy and these instruments is vital so that research and cohesion policies reinforce each other at regional level with national and regional development strategies showing how this will be achieved. Cohesion policy can help all regions to build up research and innovation capacity, thus contributing to the effective participation of those regions in the European Research Area and research and innovation activities of the Community in general. In particular, it has two important roles to play. The first is in helping regions to implement regional innovation strategies and action plans which potentially can have a significant impact on competitiveness, both at regional level and in the Union as a whole; the second is in contributing to raising the research and innovation capacity in the region up to a level where it can participate in transnational projects for research.
Regional strategies should thus concentrate on investing in RTD, innovation, human capital and entrepreneurship; ensuring that these investments respond to the economic development needs of the region and that the capacity exists to transform research into marketable product, process and service innovation; enhancing technology transfer and knowledge exchange; promoting the development, dissemination and uptake of ICTs within firms, and ensuring that enterprises willing to invest in high added value goods and services have access to finance. Such strategies should make specific provision for experimentation, with a view to increasing the capacity of policy interventions and intermediary organisations to stimulate regional and local actors, in particular SMEs, to innovate.

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Source: https://www.legislation.gov.uk/eudn/2006/702/annex/division/1/division/1.2 (the official version)
Page: https://openlegislation.uk/eu-decision-2006-702/annex/division-1/division-1.2
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.