Europe innovation institute slammed as ineffective

Apr 15, 2016, 4:37 PM EDT
E.U. flag.
(Source: Bobby Hidy/flickr)

The European Institute of Innovation and Technology (EIT) was slammed by auditors in a report released on Thursday. The institute, backed with almost €3 billion ($3.38 billion), was established in 2008 as the E.U.’s answer to MIT. But the auditors identified management problems, ill-suited short-term grants, and potential conflicts of interest, and recommended major changes -- particularly to the funding model.  

The EIT operates through Knowledge Information Communities (KICs): groups of universities, research institutes, and businesses working in specific technologies. They can get up to 25% of their funding from the EIC, and the rest must come from other sources.

Nature reports:

In 2014, the three initial KICs created 90 start-ups, 400 business ideas and 71 new or improved products, services or processes. But auditors say that the EIT’s contribution to these projects is modest at best, and in most cases it made little difference to business as usual. The EIT claims that every euro spent from the EIT’s budget triggers four extra euros for innovation, but the auditors say this is “undemonstrated and implausible”. A survey that auditors conducted among the three initial KICs revealed that most of their claimed activities would have been carried out whether or not the EIT existed.

The challenge of how to encourage innovation can be vexing, and the EIT is hardly alone in this dilemma. A recent report (see Blouin News’ coverage) found that most U.S. firms aim high for innovation, but tend to fall short of achieving it. This topic also came up at last year’s Blouin Creative Leadership Summit, during the panel New Adaptations for Business Leaders. Panelist Andrew Yang, CEO of Venture for America, said that the biggest disappointment of Silicon Valley is that they don’t push non-market innovation, which is often what we really need.

By its very nature, innovation is something new and disruptive, not something that can be predicted on any set timetable. And quality matters far more than quantity when it comes to overall worthiness, so numerical quotas miss the point entirely. For many angel investors, if only 1 out of 10 seed projects does well, that more than makes up for the 9 disappointments. But that kind of willingness to gamble and accept numerous failures (with what in hindsight are wastes of time and money) does not mesh with auditors who want every dollar spent to deliver results.

Improvement is always welcome, but it would be a mistake to scrap the EIT altogether.