Tuesday, June 16, 2009

The WSJE Future Leadership Institute and The Lisbon Strategy

The most important goal of The Wall Street Journal Europe Future Leadership Institute is to bridge university and industry. Much of the topics related to this goal are in synchronization with the education goals of the Lisbon Strategy, a strategy of the European Community originally aimed at making the European Union the most competitive economy in the world by 2010 (since then the below is being updated given the recent signing of the Treaty of Lisbon). Although there are some inconsistencies with the goals of the Lisbon Strategy and the actions and results achieved on the field, The Wall Street Journal Europe Future Leadership Institute supports the goals of the Lisbon Strategy.

We will look into 5 questions explaining the importance of the educational goals of the European Community related to the goals of The Wall Street Journal Europe Future Leadership Institute.
1. What is the Lisbon Strategy ?
2. What is the Research and Development Programme ?
3. What is the European Research Area (ERA) ?
4. What is the Treaty of Lisbon ?
5. What is the viewpoint of The Wall Street Journal Europe Future Leadership Institute ?

1. What is the Lisbon Strategy ?
During the meeting of the European Council in Lisbon (March 2000), the Heads of State or Government launched a "Lisbon Strategy" aimed at making the European Union (EU) the most competitive economy in the world and achieving full employment by 2010. This strategy, developed at subsequent meetings of the European Council, rests on three pillars:
An economic pillar preparing the ground for the transition to a competitive, dynamic, knowledge-based economy. Emphasis is placed on the need to adapt constantly to changes in the information society and to boost research and development.
A social pillar designed to modernise the European social model by investing in human resources and combating social exclusion. The Member States are expected to invest in education and training, and to conduct an active policy for employment, making it easier to move to a knowledge economy.
An environmental pillar, which was added at the Göteborg European Council meeting in June 2001, draws attention to the fact that economic growth must be decoupled from the use of natural resources.

A list of targets has been drawn up with a view to attaining the goals set in 2000. Given that the policies in question fall almost exclusively within the sphere of competence of the Member States, an open method of coordination (OMC) entailing the development of national action plans has been introduced. Besides the broad economic policy guidelines, the Lisbon Strategy provides for the adaptation and strengthening of existing coordination mechanisms: the Luxembourg process for employment, the Cardiff process for the functioning of markets (goods, services and capital) and the Cologne process on macroeconomic dialogue.
The mid-term review held in 2005, for which a report was prepared under the guidance of Wim Kok, former Prime Minister of the Netherlands, showed that the indicators used in the OMC had caused the objectives to become muddled and that the results achieved had been unconvincing.
For this reason, the Council has approved a new partnership aimed at focusing efforts on the achievement of stronger, lasting growth and the creation of more and better jobs. As far as implementation is concerned, the coordination process has been simplified. The integrated guidelines for growth and employment will henceforth be presented jointly with the guidelines for macroeconomic and microeconomic policies, over a three-year period. They serve as a basis both for the Community Lisbon Programme and for the National Reform Programmes. This simplification in programming makes it possible to monitor implementation more closely by using one single progress report.
The Lisbon strategy has defined 8 program area’s:

Broad economic policy guidelines (BEPG)
European Employment Strategy (EES)
Information society
Open method of coordination
Research and development

The programme area of interest to The Wall Street Journal Europe Future Leadership Institute is: Research and development

2. What is the Research and Development Programme ?
Research and development policy is one of the European Union's priorities, at the heart of the Lisbon Strategy to boost employment and growth in Europe. Research, with education and innovation, forms the "knowledge triangle", which it is hoped will allow Europe to maintain its economic dynamism and social model. The Seventh Framework Programme for Research (2007–2013) seeks to consolidate the European Research Area (ERA) and stimulate the national investment needed to reach the target of 3% of GDP.
Moreover, the creation of a European Institute of Technology by 2009 should enable European excellence to fully take shape.
Coordination of research and development initiatives within the Community is based on various instruments:
The framework programmes for research and technological development. These multi-annual programmes, introduced in 1984, encompass more specific programmes covering fields as varied as information and communication technologies, the environment, biotechnology, energy (including nuclear power), transport and mobility of researchers. The Seventh Framework Programme (2007–13) has the largest budget since the creation of a European research identity. It responds to the needs of industry and of European policies, placing knowledge at the service of economic, social and environmental progress.
The Joint Research Centre (JRC) — the research body which supports the action of the Union — is made up of eight research establishments distributed in the European Community which meet the specific needs of the various policies of the European Commission. It is at the forefront of research in nuclear energy (especially safety) and has diversified into sectors such as materials, the environment, industrial risks and satellites. It is funded through the EU framework programmes for research and by its own earnings from commercial contracts.

European research and development policy is based on provisions in the three founding treaties (ECSC, Euratom and Title XVIII of the EC Treaty). The Single European Act introduced the concept of technology into Community law and the Treaty on European Union (EU Treaty) then developed the Community's objectives in this field.
See: European Research Area (ERA)

3. What is the European Research Area (ERA) ?
The European Research Area brings together all of the Community's resources to better coordinate research and innovation activities at the level of both the Member States and the European Union.
This concept was launched by the Commission in 2000 with the idea of developing truly attractive opportunities for researchers.
Previously, research at European level had faced numerous difficulties: fragmentation of activities, isolation of national research systems, disparity of regulatory and administrative frameworks, and low levels of investment in knowledge.
Through the resources made available, the ERA should make it possible to share data, compare results, carry out multi-disciplinary studies, transfer and protect new scientific knowledge and gain access to centres of excellence and state-of-the-art equipment.
The European research area should thus fulfil an ambition of determining value for the European Union, namely to develop a genuine common research policy.
The above is being updated given the recent signing of the Treaty of Lisbon.

4. What is the Treaty of Lisbon ?
Taking Europe into the 21st century
The Treaty signed by the Heads of State or Government of the 27 Member States in Lisbon on 13 December 2007 will provide the EU with modern institutions and optimised working methods to tackle both efficiently and effectively today's challenges in today's world. In a rapidly changing world, Europeans look to the EU to address issues such as globalisation, climatic and demographic changes, security and energy. The Treaty of Lisbon will reinforce democracy in the EU and its capacity to promote the interests of its citizens on a day-to-day basis.

Europe is not the same place it was 50 years ago, and nor is the rest of the world.
In a constantly changing, ever more interconnected world, Europe is grappling with new issues: globalisation, demographic shifts, climate change, the need for sustainable energy sources and new security threats. These are the challenges facing Europe in the 21st century.
Borders count for very little in the light of these challenges. The EU countries cannot meet them alone. But acting as one, Europe can deliver results and respond to the concerns of the public. For this, Europe needs to modernise. The EU has recently expanded from 15 to 27 members; it needs effective, coherent tools so it can function properly and respond to the rapid changes in the world. That means rethinking some of the ground rules for working together.
The treaty signed in Lisbon on 13 December 2007 sets out to do just that. When European leaders reached agreement on the new rules, they were thinking of the political, economic and social changes going on, and the need to live up to the hopes and expectations of the European public. The Treaty of Lisbon will define what the EU can and cannot do, and what means it can use. It will alter the structure of the EU’s institutions and how they work. As a result, the EU will be more democratic and its core values will be better served.
This new treaty is the result of negotiations between EU member countries in an intergovernmental conference, in which the Commission and Parliament were also involved. The treaty will not apply until and unless it is ratified by each of the EU’s 27 members. It is up to each country to choose the procedure for ratification, in line with its own national constitution.
According to Article 6 of the Treaty of Lisbon, "this Treaty shall enter into force on 1 January 2009, provided that all the instruments of ratification have been deposited, or, failing that, on the first day of the month following the deposit of the instrument of ratification by the last signatory State to take this step. Currently, 26 Member States have already approved the Treaty and 23 have deposited their ratification instruments in Rome.

5. What is the viewpoint of The Wall Street Journal Europe Future Leadership Institute ?
The essence of the Lisbon Strategy is “ to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion. ”
One of the elements to reach the goals of the Lisbon Strategy is “ Modernisation of Europe’s universities [is] a core condition for the success of the Lisbon Strategy [and] part of the wider move towards an increasingly global and knowledge-based economy.”

But what are universities for ?
• The pursuit of knowledge
• Education: the formation of human capital and the engine of upward social mobility
• Scientific research and innovation – through human capital
• Capitalizing university research: the “Entrepreneurial University”

How to measure the impact of universities in the “knowledge” economy ?
• Quantitative:
For example: % of working age population that attained tertiary education:
US 39
Belgium 31
OECD Average 26

• Qualitative:
– Degree production system ?
– What skills? Matching degrees with jobs
– Incentives for rational choice? (bottleneck jobs)
– Education and the entrepreneurial spirit?
– Degrees or PhDs?

Problems with Lisbon strategy:

- National Competencies: EU depends on MS to implement Lisbon strategy
- Several EU-countries struggle with ‘more and better jobs’ guidelines
- Focus on easiest goal: spend more money on R&D (Barcelona R&D target became core of Lisbon strategy)
- Spending target is easy compared to establishing a reform process

Lisbon and the importance on research:

By 2010: 3 % National GDP > R&D
– 1 % government
– 2 % private

Today ?
2005: EU-27: 1,84 % GDP > R&D
2004: US: 2,68 % GDP > R&D
2004: Japan: 3,18 % GDP > R&D
2005: Sweden: 3,86 % GDP > R&D
2005: China: 1,34 % (but comes from 0,95 % in 2001)

Research as % of tertiary education:

PhD participation Total As % tertiary education % Science and Engineering

Belgium 07.014 3,3 0,44
Czech Republic 23.282 7,3 0,51
Spain 76.895 4,2 0,25
Austria 15.524 6,5 0,30
Finland 21.207 7,1 0,40
Sweden 22.460 5,2 0,42
United Kingdom 89.378 4 0,41
Switzerland 15.850 8,1 0,39
United States 375.642 2,2

Financing Universities:

In % of GDP for tertiary education / Research + Education (only education)

2004 2000 1995
• Belgium 1,2 (0,80) 1,3 -
• The Netherlands 1,3 (0,8) 1,2 1,4
• Denmark 1,8 (1,35) 1,3 1,6
• Sweden 1,8 (0,9) 1,6 1,6
• Finland 1,8 (1,1) 1,7 1,9
• Korea 2,3 (2,03) 2,6 -
• US 2,9 (2,03) 2,7 2,4
• UK 1,1 (0,85) 1,0 1,2
• Ireland 1,2 (0,86) 1,5 1,3
• Italy 0,9 (,055) 0,9 0,7
• Switzerland 1,6 (0,93) 1,1 0,9

• Relative expenditures on tertiary education fall back in Belgium, Finland, Norway, Netherlands, UK and Ireland (and remain low in Germany and France)
• Universities are not able anymore to cover all technological and economical developments in society. Knowledge intensive multinationals have outgrown universities. Universities have to be selective and must specialize.
• Relationship between state owned universities and state owned companies has deteriorated.
• Researchers in multinationals have been educated at universities ! (Probably core task of universities)
• Universities in Europe are under-financed.

Critical elements:
• An economy is not a mechanical construction in which an increased input of R&D will lead to an increased output of GDP
• Companies automatically invest in R&D given market conditions. The current level of R&D spending in Europe reflects reality in supply and demand.
• An increase in R&D spending will only lead to more GDP if government reshapes at the same time a set of parameters to make economical climate more attractive for entrepreneurs and investors.
• Ireland: According to Eurostat research: Ireland invested less in R&D than average of EU-15, but became Europe’s richest country between 1997 and 2003. Therefore wealth is not primarily the result of R&D spending, but the result of government actions in reshaping market conditions for innovators and investors (tax system, bureaucracy, procedures, …)
• Innovation is not necessarily linked to R&D. Innovation is often the result of smart thinking in a dynamic organisation, based on existing knowledge. Investing in management, organisation, leadership and labour processes will lead to innovative behaviour (social innovation).

Most important information sources for most innovative companies in EU (Eurostat 81/2007)

Internal University Public R&D Customer
• EU-27 45,7 % 3,6% 2,7% 26,7%
• Belgium 54,7% 3,8% 2,3% 38,9%
• Denmark 56,2% 3,3% 0,5% 33,4%
• Germany 53,3% 3,4% 0,5% 35,0%
• Netherlands 45,0% 2,6% 2,0% 27%
• Finland 56,9% 4,9% 2,4% 38,1%

Relationship universities and innovative companies
Eurostat research 2002 – 2004:

• Industry doesn’t use universities as primary source to innovate.
• Industry claims conferences, journals and associations are more important sources to innovate than universities.
• > Ties between industry and university have to be strengthened !! (See WSJE Future Leadership Institute)
• > Innovations of most companies are not related to R&D, but to social innovations (creativity)
• > Mansfield: 1975 – 1994: R&D at universities was responsible for only 8 a 9 % of all product innovations and only 7 % of all process innovations in US.

Lisbon, research or education ?

• US: SPECIALISATION: 3.300 Universities > 215 have right to issue postgraduate degrees > less than 100 are R&D universities (with public funding) (SELECTIVE structure)
• US Universities: focus on excellence >< Europe Universities: focus on equality
• Europe: 2000 Universities: most of them have post graduate degrees, most of them apply for R&D grants.
• US universities are industry’s primary source of people with research training and experience … universities are the only places where advanced research and education are integrated on a large scale…

Paradise for Brains on the Move

• The global war for mobile human capital
• Science and Technology
– % of foreign science and technology students: US 25 – EU 5
– 400.000 EU S&T graduates live and work in the US
• Human capital makes the difference
– US: 40% of PhDs in 2006 to non-citizens
– Silicon Valley: 50+% of graduating foreign students become involved in start-ups
• Universities: an international challenge!


• Europe: Strengthen ties between Industry and University

• Lisbon: investing 3 % of GDP in R&D by 2010 will not automatically lead to increase of wealth. Extra measures are necessary such as investment in economical climate, bureaucracy, entrepreneurship.

• Currently EU universities are creating scientists who are leaving the universities to innovate at multinationals. Multinationals have outdrawn universities in the game of innovation, leading to wealth. Increased investment in R&D at universities will not automatically lead to more innovation in society (too much general universities).

• EU Universities are underfinanced compared to US and others

For more information on the Lisbon Strategy and the viewpoints of The Wall Street Journal Europe Future Leadership Institute, contact Gert Van Mol, gert.vanmol@dowjones.com