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Success in the global economy is increasingly determined by firms’ ability to respond innovatively to the changing views and needs of customers and users – the demand-side of the market. So far, the way in which market demand facilitates innovation has received less attention in European policy formulation than the private and public funding of R&D and expenditure on education, which typically represent supply-side policies.

This paragraph is lifted from the first page of the paper “Demand as a driver of innovation – towards a more effective European innovation policy” (pdf, 54 kb, 6 pages), a discussion note to the informal meeting of the competitiveness ministers that takes place today and tomorrow in Jyvaskyla, Finland.

“For this reason,” the document continues, “it has become important to ensure that European innovation policy places sufficient emphasis on market demand and the needs of users.”

Huw Jones of the news agency Reuters comments: “The presidency’s heavy emphasis on the role of market forces and competition, particularly in traditional public services, may raise hackles among some member states, but is likely to find some backing from the EU’s executive Commission. “Innovation is where Europe appears to lag most behind its main competitors,” the Commission said in a statement. “The EU invests about a third less in research than the United States, and the EU/U.S. innovation gap has not narrowed in recent years. Meanwhile emerging countries like China and India are fast becoming world-class centers of research and innovation,” the EU executive said.”

According to the Reuters story, Finland is taking the lead role in pushing forward European innovation. The basic idea is to move from a “supply-side” approach (i.e. specific targets for aggregate R&D spending) to a “demand-side” approach that will make European firms more sensitive to the demands of the market.

(via The Business Innovation Insider)