FINNOV News / FINNOV: Finance, Innovation & Growth

FINNOV News

Press Release Feb 2012

Posted on 06 February 2012

ECONOMISTS CALL FOR RADICAL AND IMMEDIATE REFORM OF FINANCIAL SYSTEM

• New research uncovers key policy recommendations for financial reform to exit the crisis
• MPs told “Focus must be on finance for innovation, not innovation for finance”

London, 2nd February 2012 – The financial crisis has exposed a dysfunctional financial system that threatens European and global economic stability with potentially major social consequences. That’s according to a new report released today by Finance, Innovation and Growth (FINNOV – www.finnovfp7.eu), a three-year research project funded by the European Commission.

FINNOV explored the link between the financial sector and real economy, analysing to what extent financial activities promote or impede industrial growth and innovation. The research found immediate financial reform is essential to end the crisis and drive economic growth, leading to a number of challenging policy recommendations, including:

• Venture capital is most effective when preceded by strategic investments by the state in early stage innovation;
• Successful state investments in innovation should deliver tangible returns to the public purse, not just debt;
• Blanket support for SMEs is misguided and should be better targeted to producing not more firms but better firms that create more jobs and better products;
• Share buy-backs should be subject to stronger governance control or banned outright;
• Indicators of performance, used by financial markets, should be rebalanced to reflect companies’ investments in innovation, R&D and productivity.

To read the full press release, please click here.

EC Investment in Science

Posted on 22 July 2011

€7bn will be invested in research and innovation by the European Commission, announced Commissioner for Research, Innovation and Science, Máire Geoghegan-Quinn. Under the Seventh Framework Programme for Research (FP7), this will form the Commission's largest funding package to date, putting research at the top of the political agenda.

The Commissioner expects the extra boost to create approximately 174,000 jobs in the short term, and create almost €80bn in GDP over the next 15 years. Universities, research centres and industry will be the main beneficiaries of the funding, but SMEs will also receive a €1bn package.

Speaking about the investment, Commissioner Geoghegan-Quinn said: "...Europe is again showing its commitment to putting research and innovation at the top of the political agenda for growth and jobs. EU-wide competition for these funds will bring Europe's best researchers and innovators together to tackle the biggest issues of our time, such as energy, food security, climate change and our ageing population.

"The Commission is proposing a significant increase in research and innovation funding for our Horizon 2020 programme post-2013 and I want to show taxpayers already with the calls we are announcing today our determination to get the best value for every euro."

Geoghegan-Quinn stated that the focus of this funding was to help create sustainable jobs and growth in Europe, enabling a competitive edge with other science-driven societies such as the US and China. This, she explained, will be achieved by creating an easier path to achieving research into the commercial sector. This 'market-linked' approach had already formed part of the European Innovation Partnerships (EIPs) under the Innovation Union action plan.

Mobility will also be a focus for this funding and a substantial €900m will be available through 'Marie Curie Actions' to support researchers to develop their careers, while €20m will be set aside to 'stimulate entrepreneurship and cooperation' between academic institutes and industry. This boost in funding is certainly an important one, particularly for creating stronger ties between European researchers, but also in recognising the value of science in building stable economies.

For further information, please review the European Commission Press Release

The above article was published on the PublicService.co.uk website on 22nd July 2011.

Entrepreneurial State Video

Posted on 07 July 2011

On Monday 11 July 2011, Professor Mariana Mazzucato launched her new pamphlet entitled The Entrepreneurial State.

Watch Professor Mariana Mazzucato explaininig the animating idea behind her Demos pamphlet The Entrepreneurial State, in conversation with Demos Director Kitty Ussher

Prof Mazzucato makes the case for a reassessment of the role of government in UK growth policy. She argues that for Britain to raise its growth rates and be at the forefront of new opportunities such as green technology, government needs to be far more risk-taking, not just in blue-skies science but operating nimbly alongside business at the frontiers of technology. The Entrepreneurial State pamphlet explores growth theory and the nature of entrepreneurial risk and applies it to real-life examples in the US, Japan and Europe. It concludes with specific examples of how taxpayers' money in the UK could be better deployed to raise our long-term growth potential.

Speakers at the launch were:

Kitty Ussher, Director at the DEMOS Think-tank (Chair)
Andrea Leadsom MP, Member of Parliament for South Northamptonshire
Will Hutton, Executive Vice-Chair of the Work Foundation
Mariana Mazzucato, Professor in the Economics of Innovation at The Open University

The event took place on Monday 11 July 2011 at the House of Commons, Westminster, London, SW1A 0AA.

The Entrepreneurial State pamphlet is available for download via the DEMOS website. Should you like to receive a hard copy of the Entrepreneurial State pamphlet, please email the FINNOV team or call us on +44 (0)1908 654 493.

Press Release May 2011

Posted on 19 May 2011

Businesses Should Be Rewarded for Innovation

European governments need to devise policies that enable financial markets to reward rather than penalise innovation and thereby encourage longer-term investment planning, research coordinated by the Open University warns.

Evidence suggests that companies who engage in riskier and more innovative ventures are being penalised by banks through high interest rates and by governments through tax measures when compared with their less innovative counterparts.

The research highlights how the tendency to penalise innovation is leading to businesses focusing on short-term profits rather than long-term growth, which creates a situation in which the processes that connect the price and fundamental value of an asset fail to self-correct. As the research explains, such a malfunction causes “price and value to diverge to the point that the pricing mechanisms undergo a catastrophic failure” – known as a financial bubble.

The increasing trend for companies to buy back their own stock, to keep stock prices high, also reflects the focus on short-term profits rather than long term growth. These stock buybacks often occur at the expense of research and development spending.

The findings come in the second of a series of policy briefs published by FINNOV (Finance, Innovation and Growth), which is a three-year study to understand the sources, implications and management of positive and negative changes in financial markets. The Open University leads FINNOV, coordinating a consortium of institutions from across Europe, including the Economics Institute in the Czech Republic and the University of Cambridge, in conducting the research.

Read the full press release.

CNB New Board Member

Posted on 17 February 2011

Professor Lubomir Lizal (FINNOV Researcher, WP6) was appointed as a Board Member of the Czech National Bank (CNB) by the Czech President Václav Klaus. Professor Lizal began his six-year term in February 2011. The Bank Board is the highest-level governing body of the Czech National Bank and is responsible for taking decisions on monetary policy and on measures in the financial market supervision area.

SCOOP Feature

Posted on 15 February 2011

FINNOV was highlighted in the SCOOP newsletter (Issue 10, February 2011). View the FINNOV feature

The SCOOP newsletter is a monthly news service that provides a platform for dissemination of research findings from EU projects funded through the 6th and 7th Framework Programmes. The newsletter is produced by the Science Communication Unit at the University of the West of England, Bristol, UK. The service is funded by the European Union under the 7th Framework Programme for Research.

Schumpeter Prize

Posted on 02 July 2010

On 22 June 2010 the International Joseph A. Schumpeter Society awarded William Lazonick the 2010 Schumpeter Prize for his book, Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States (Upjohn Institute for Employment Research, 2009). Also awarded the 2010 Schumpeter Prize was Bart Nooteboom of Tilberg University for his book, A Cognitive Theory of the Firm (Elgar, 2009). The two recipients share the cash reward of €10,000.

The Prize is awarded every two years in recognition of a recent scholarly contribution related to the work of Joseph Schumpeter, a leading economist of the first half of the 20th century whose name has become synonymous with the study of innovation and economic development. This year the theme of the Prize competition was "Innovation, Organization, Sustainability and Crises".

Lazonick's book analyzes the transformation of the mode of business organization that characterizes US high-tech industry. He shows how a business model that was an engine of innovation in the 1980s and 1990s has resulted in an inequitable income distribution and unstable employment. Lazonick argues that, with increasing inequity and recurring instability in the 2000s, the engine of innovation has stalled. At the root of the problem is the corporate focus on stock-price performance, manifested in large-scale stock buybacks and the explosion of executive pay. This book is essential for understanding how the “financialization” of US industrial corporations has weakened the US economy and contributed to the current crisis. Further information on Sustainable Prosperity in the New Economy?

William Lazonick is Professor in the Department of Regional Economic and Social Development at the University of Massachusetts Lowell and Director of the UMass Lowell Center for Industrial Competitiveness. He is also affiliated with the CNRS Groupe de Recherche en Économie Théorique et Appliquée (GREThA), Université Montesquieu Bordeaux IV, where he is engaged in the research project on finance, innovation, and growth (FINNOV: http://www.finnov-fp7.eu/), funded by the European Commission. Lazonick is also directing a complementary project on financial institutions for innovation and development, funded by the Ford Foundation, with a focus on the United States, Japan, and China.