Damning report on effectiveness of innovation institute

The European Institute of Innovation and Technology or EIT, set up by the European Union to bring together academic research, science and business, is not as effective as it could be and is beset with management problems, according to a damning new report by the European Court of Auditors.

But it is also an indication of some of the difficulties of managing large public-private collaborations between universities and businesses.

The institute, based in Budapest, Hungary, was set up in 2008 to promote the translation of research into innovative commercial applications, and counter a lack of innovation and entrepreneurial culture in higher education. But the just released special report of the EU’s auditors said: “The EIT is not the impact-driven institution which it was envisaged to be.”

"If the EIT wants to become the ground-breaking innovative institute it was originally conceived to be, significant legislative and operational adjustments are required to better foster the EU's innovation potential," said Alex Brenninkmeijer, the member of the European Court of Auditors responsible for the report.

Among its criticisms, the auditors said seven years after its inception, the EIT is still not fully operationally independent from the European Commission. This has hampered its decision-making.

High staff turnover, including at senior management level, has limited the institution’s long-term planning and efficiency, the report said. Some 30% of posts were vacant at the end of 2013 and 15% were vacant in 2015. Since inception it has had five different executive directors or acting directors, and of those, two left after less than a year. Salary packages may not be attractive enough to recruit and retain staff, the report said.

Innovation communities

With a budget of €3 billion (US$3.4 billion) for 2008-20, the EIT is not a research centre concentrated on one campus but provides grants to groups in different countries, called Knowledge and Innovation Communities or KICs, made up of public and private partners from academia, research and business.

The three KICs launched in 2010 include more than 500 partners across various disciplines, countries and sectors, and include climate change mitigation and adaptation; sustainable energy; and information and communication technologies. In all three programmes, 25% of the funding comes from the EU budget, and the rest from the partner organisations.

At the end of 2014 two new innovation communities on health and raw materials were added, increasing the total number of partners from 500 to 800.

“The practical arrangements between the EIT and the KICs are poorly suited to innovation,” the report said.

Performance indicators and the monitoring and reporting do not provide an informative picture of results, it added.

Leveraging funding

In addition the KICs were designed to leverage EU funding so that money invested by the EU generates a higher investment from other sources.

The EIT has claimed a leverage factor of 4. Around 80% of funding generated from other sources. But the auditors noted that “the claimed leverage effect is undemonstrated and implausible.”

In some cases KIC partners were doing what they would do anyway if the EIT did not exist, and declaring the activity as complementing the KIC. For example, the auditors found, KIC partners included the cost of non-EIT students on courses in which EIT students participate, even though they were part of the standard educational programme of the university.

Moreover, “the financial sustainability of the KICs is doubtful,” the report said. Businesses are not involved enough in the KIC activities even though their participation was a prerequisite for the EIT to be successful. Business participation needs to be improved, the report said.

However businesses have also complained that KIC agendas were mainly driven by the needs of universities. In the first three years, collaborative projects by KICs were abandoned or did not lead to tangible results because they were not sufficiently focused on market application, according to the report.

It also recommended that the EU commission should propose a new funding model. During 2010-2014 just under half the EIT’s funding went to universities which made up 18% of EIT partners, and 24% of funding went to businesses which were 56% of partners.

Top five countries receiving EIT support are the Netherlands, Germany, France, Sweden and the UK which together receive almost three-quarters of funding. While the EIT said it needed to concentrate on excellence and research infrastructure, the auditors recommend that the number of benefiting countries be widened.

EIT response

Martin Kern, EIT Interim Director said in a statement issued on Thursday: “We welcome that the auditors confirm that the EIT is achieving its core goal of connecting business, education and research to boost innovation and entrepreneurship across Europe.”

He said the EIT has delivered on its promise and created Europe’s largest innovation community, bringing together more than 800 excellent partners across Europe.

“Together, we have already developed almost 200 innovative start-ups, generating more than 900 business ideas. Almost 500 students have graduated from the EIT educational programmes and 1,000 are currently enrolled in EIT entrepreneurial degree courses. These graduates are agents of change and innovation leaders. The Forbes 30 under-30 Europe list, introducing the most promising entrepreneurs, features five start-ups supported by the EIT Community.”

The EIT will also continue to work closely with the European Commission to implement the auditors’ recommendations, he said.

The auditors have said the EIT use of the term ‘start ups’ needed to be better defined.