Polishing Belgium’s Innovation Jewel

Situated in the northern part of Belgium, the Flanders region is a natural meeting point for knowledge and talent, attracted by its highly skilled population, splendid cultural heritage, outstanding quality of life, excellent research, and easy accessibility. Its capital city Brussels doubles as the capital of Belgium and the headquarters of the European Union (EU). Additional assets include an open economy, excellent transportation and logistical infrastructure, and EU funding for science and technology development. Flanders has a strong educational infrastructure of six universities and 22 non-university higher-education institutions. These institutions have been grouped into five associations (Leuven, Ghent, Antwerp, Brussels, and Limburg) to facilitate and consolidate the implementation of the Bologna process, which aims to coordinate higher education across Europe.

Over the past quarter of a century, Belgium was gradually transformed from a centralized state into a federal state. During this process, education and nearly all R&D-related responsibilities were devolved to the regional authorities at the level of governance best suited for implementing these policies.

One of the richest and most densely populated European regions (6 million people in an area the size of Connecticut), Flanders has few natural resources. Its open economy is dominated by the service sector and by small and medium-sized enterprises (SMEs). The primary activities in the services sector are education, business services, and health care. Strong economic sectors include the automotive industry, the chemical industry, information and communication technology (ICT), and life sciences. Foreign companies represent almost 25% of Flemish added value and 20% of jobs in Flanders. Exports are extremely important and continue to grow [98.8% of Flanders’ gross domestic product (GDP) in 2005].

Its highly skilled, multilingual population has one of the highest productivity rates in the world. Flanders’ social and economic progress is largely determined by its ability to face and adapt to the constantly changing challenges of the knowledge society in an ever-expanding global environment. This backbone of knowledge is formed by the strong partnership between education, research, innovation, and entrepreneurship.

Reinforcing the scientific and technological innovation base is one of the government’s top priorities. In the mid1990s, the Flemish government started to systematically increase its investment in science and technological innovation. Over the past 10 years, public outlays for R&D almost doubled. They are evenly distributed to support R&D at academic institutions and in companies. In 2005, R&D accounted for 2.09% of Flanders’ GDP, well above the EU average of 1.85%. Businesses provided 70% of the R&D spending.

Increasing spending is a vital condition for a successful R&D policy but not sufficient on its own. The money must be spent wisely, and Flanders has studied successful programs in other countries to learn lessons that it can apply to its own programs. The result has been an R&D portfolio that seems to have the critical ingredients for success:

• It maintains a balance between basic and applied research and between support for university and industry research.
• It emphasizes a bottom-up approach where researchers are free to propose their own projects and funds are awarded on the basis of quality.
• Universities and research institutes are given significant autonomy in directing research. The government provides a block grant to an institution, which must agree to long-term performance goals. Those that meet their overall goals continue to receive funding.

Flanders has been an active participant in EU discussions about innovation policy and has adapted its policies in response to what it has learned. At the Lisbon European Council in 2000, the EU heads of state expressed their ambition for the EU to become by 2010 “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.” The 2002 Barcelona European Council set a target for every country to spend 3% of GDP on R&D by 2010, with two-thirds provided by industry and one-third by public authorities.

In 2003, the Flemish government signed an Innovation Pact with the key players from academia and industry. All parties subscribed to the 3% Barcelona target. The Flemish Science Policy Council (VRWB) has been designated to monitor the implementation of the Innovation Pact using a set of 11 key indicators. These include the number of patents, R&D personnel, higher-education degrees, and risk capital.

The most recent monitoring results, published in July 2007, indicate that Flemish innovative capacity remains average. We are not doing enough to transform the country’s excellent academic research results into innovative products, a problem encountered in many other European countries. In addition, only a few (mostly international) companies account for the majority of industrial research activities, making the Flemish economy particularly vulnerable to external events and corporate decisions.

In response, we have begun revising our R&D policy with the aim of resolving the innovation paradox by more effectively tapping into the practical applications of academic research, spreading innovation more broadly throughout the economy, and acquiring the strategic intelligence required to guide an evidence-based R&D policy.

R&D players

R&D in Flanders is carried out in many different places. The main players are the universities, the strategic research institutes, the hogescholen (non-university institutes for higher education), and industry.

Flanders has six universities, which share a threefold mission of education, research, and service to society and third parties. They are based in Leuven, Ghent, Antwerp, Hasselt, and Brussels. Since 2001, the University of Hasselt has been engaged in long-term cross-border cooperation with the Dutch University of Maastricht.

The 22 hogescholen form the second pillar of our dual system for higher education, providing higher education and advanced vocational training outside the universities. Their mission also includes scientific research and service to society. As stated earlier, universities and hogescholen have started to work together much more closely in what are known as associations.

Flanders also has four public strategic research centers, which are active in strategic scientific disciplines:

• IMEC was founded in 1984 and has since developed into a world-renowned research and training institute for research into microelectronics. It currently employs more than 1,200 scientific and technical staff and has an extensive network of international contacts. Its commercial activities include technology transfers, cooperation agreements with companies, and participation in spin-offs. IMEC received a €39 million block grant from the Flemish government for 2007 (see sidebar).
• The VIB, founded in 1996, is an inter-university research institute with more than 860 staff in several top-class university units, which operate in the field of biotechnology. Its basic activities consist of fundamental research, including research into cancer, gene therapies, Alzheimer’s disease, protein structures, technology transfer, and information dissemination. VIB’s public grant amounts to €38.2 million in 2007.
• VITO was set up in 1992 and groups a dozen expertise centers for R&D; it also acts as a reference lab for the Flemish government. It employs more than 400 staff. Noteworthy activities include surface and membrane technologies, alternative sources of energy, and in vitro cell cultures. The public grant for 2007 is set at €35.2 million.
• IBBT was established in 2003. Its primary mission is to gather highly competent human capital and perform multidisciplinary research made available to the Flemish business community and the Flemish government. This research looks at all aspects necessary for enabling the development and exploitation of broadband services, from technical and legal perspectives to the social dimension. Through investment in multidisciplinary research, the Flemish government wants to empower Flanders as an authoritative and international player in the information society of the future. In 2007, IBBT received €23 million from the Flemish government.

Last but not least, an abundance of market-oriented research is being done in and by companies, primarily SMEs. The government takes an active role in stimulating their participation in innovative research.

Policy priorities

The strategic priorities for Flemish R&D policy, as adopted by the Flemish government for the 2004–2009 period, can be summarized as follows:

• A strong commitment to achieving the 3% of GDP spending target by 2010
• The introduction of an integrated approach to innovation as a cross-cutting dimension
• The strengthening of the building blocks for science and innovation (public funding, human resources, public acceptance of science and technology, research equipment, and infrastructure)
• The efficient use of existing policy instruments for strategic basic and industrial research
• The reinforcement of tools for knowledge transfer and marketing of research results
• Continued attention to policy-oriented research and evaluation of existing policy measures
• A strong emphasis on international cooperation, in both the bilateral and the multilateral context

Tackling the innovation paradox. University researchers have long worried that working with industry would somehow corrupt them and undermine the prestige of their work. Many industry leaders believe that there is little to be gained from working with universities because there is a structural mismatch between the academic research agenda and industry’s needs. In spite of these common preconceptions, Flemish universities and industries have found productive ways to work together. A study by the Catholic University of Leuven provides detailed evidence that Flanders is finding a way out of the innovation paradox and makes proposals on what can be done to advance this process. The key findings include:

• In 2005, approximately 10% of all R&D expenditure in Flanders was generated in a collaborative partnership between industry and academia. According to 2003 data from the European Commission, industry in Belgium spends 10.9% of its R&D funding in university-related research settings, which is well above the EU average of 6.9% or the U.S. level of 6.3%.
• Over the period 1991–2004, universities and public research centers have created 101 spinoff companies, including 54 over the past five years.
• Research teams that work closely with industry also perform very well in basic research.

Encouraged by this evidence, Flanders is taking further steps to enhance university/industry collaboration. In 2004, the Industrial Research Fund (IOF) was established at the universities. The annual budget for this fund is currently around €11 million and is distributed over the six universities on the basis of performance-driven parameters, such as the number of spinoffs created, the number of patent applications, the volume of industrial contract research, and the budgetary share of each university in the European Framework Programme. Beginning in 2008, the annual budget will be increased to at least €16 million.

The IOF provides funds to hire postdoctoral staff who will concentrate on research results that show great potential for market application in the near future. This group of researchers will also be evaluated on the basis of their application-oriented performance. In the near future, the IOF will also allow the universities to fund projects in strategic basic research.

The IOF allows every university and its associated hogescholen to pursue its own policy of creating a portfolio of strategic application-oriented knowledge. Research contracts of this nature will lead to a more permanent structure for cooperation with industry. The aim is thus to stimulate industry-oriented research and to support the creation and/or consolidation of excellent research groups in industry-relevant areas by providing longer-term funding.

A second important instrument is the creation of interface cells at the universities. Functioning as government-funded technology transfer offices (TTOs), these cells help market research results through spinoffs and patents and provide advice on intellectual property rights issues to academic researchers. The operational budget for these TTOs doubled between 2005 and 2007. This increase will help staff and services become more professional and help the offices to deal with the challenge of extending their services to the broader landscape of the associations.

Even though both the IOF and TTOs are in place and it can be reasonably expected that they will make a difference in reducing the innovation paradox, further initiatives are needed. These include facilitating the mobility of researchers between sectors and the use of foresight methodology to assess the potential economic impact of existing and future technologies.

Intersectoral mobility. The movement of researchers between academia and industry is of paramount importance to enhance the exchange of knowledge and methodologies, to refine the research agenda, and to put young researchers in contact with an industrial environment where they can acquire skills not normally taught in an academic program. The main existing fellowship scheme for Ph.D. students is managed by the IWT, which is the Flemish innovation agency for industrial research. Fellows submit an applied research project, typically for a four-year period, which allows them to obtain their Ph.D. In addition, the IWT runs a limited postdoctoral program, which funds, for example, researchers planning to set up their own spinoff company.

The focus of these fellowship programs is obviously on applied research, but they cannot be considered as real intersectoral mobility because researchers are not moving back and forth between companies and university labs. In the months ahead, the Baekeland program will be launched as an alternative funding scheme, taking into account lessons learned from existing programs abroad. The program will establish four-year fellowships for Ph.D. students that are supported with a mix of government and private funds.

Foresight. In 2006, the VRWB undertook a major foresight exercise. With the support of many academic and industrial stakeholders, the VRWB embarked on the challenging task of trying to identify the major scientific and technological areas for the future, taking into account existing research potential, existing economic capacity, links with current international trends, and potential for future growth. The following six clusters have been identified:

• Transport, services, logistics, and supply chain management
• ICT and health care services
• Healthcare, food, prevention, and treatment
• New materials, nanotechnology, and the processing industry
• ICT for social and economic innovation
• Energy and environment for the service sector and the processing industry

Some might want to use these foresight results to send out a strong plea to reinstate thematic priorities in our existing funding channels. This, however, would be an unfortunate return to the past when Flanders had several top-down research programs, which didn’t leave enough breathing space for bottom-up initiatives and for smaller research actors. As said before, Flanders’ current research and innovation policy is based on an open no-strings-attached strategy, which allows and actively invites research proposals defined by the industrial and academic communities themselves. Funding is possible only after a thorough quality check, using the peer review principle as far as possible.

The results of the VRWB’s foresight exercise might become a useful reference instrument when deciding on the funding of new large-scale projects or research consortia. A potential area of application is the development of “competence centers,” which are bottom-up initiatives by industry to create a critical knowledge platform in their respective sectors. Open innovation is the underlying principle: Knowledge is accessible to all participants, and research is done in close collaboration with multiple industrial partners so that costs and risks can be shared. Of course, the necessary intellectual property rights and other legal agreements have to be put in place. About 10 competence poles are currently being funded, ranging from logistics and food to geographical information systems, to product development and industrial design. Foresight might come in handy when checking the feasibility and the potential economic impact of proposals for new competence poles.

Innovation as a horizontal policy dimension. Another major policy challenge is to broaden the concept of innovation to its nontechnological dimensions. Until very recently, Flemish innovation policy has been targeting only the technological dimension of innovation. There is a growing awareness, however, that innovation also depends on management, public and private governance structures, labor market organization, design, and other factors. The challenge is to develop suitable policy instruments to broaden the scope of innovation. The application of innovative public procurement is one of the instruments we are studying at the moment.

One of the policy priorities for the coming years is the “mainstreaming” of innovation; that is, to make sure that innovation becomes a horizontal dimension in all policy fields for which the Flemish government has responsibility. In 2005, the government approved the Flemish Innovation Plan, which puts forward nine main lines of action to stimulate creativity and innovation in all societal sectors, promote Flanders as an internationally recognized knowledge region, invest more in innovation, create an innovative environment, set a good example as a public authority, put more researchers to work, focus on the development of innovation hot spots in cities such as Ghent and Leuven, use innovation as leverage for sustainable development, and integrate innovative approaches into the social welfare system. The government endorsed this plan, which should lead to a horizontally integrated innovation approach across the board.

Strategic intelligence. The expanding rate of globalization and the complexities presented by an open innovation system in which governments no longer have the full range of instruments at their disposal to create an adequate policy mix make it imperative that governments join forces across borders. We need to enhance mutual understanding of our science and innovation systems, both within the national context and internationally.

High-quality and evidence-based policy preparation is possible only if one can bring together a team of policy experts who combine a good knowledge of the more theoretical innovation framework with well-tuned affinities for the practical needs and obstacles encountered on a daily basis by research actors, such as universities, higher-education institutes, or companies. In other words, desk study work and field work need to be combined.

One of the main challenges in the years ahead will be to boost the pool of science and innovation management knowledge capacities in Flanders and network the various agencies and organizations that carry out science and innovation analyses, very often on an ad hoc basis. The Flemish research landscape is so small and the capacity so limited that only a networked approach can yield efficient results. It does not make sense to have small and often isolated study cells at various organizations that are often not aware of each other’s activities. That situation actually reduces efficiency and creates situations where, for example, similar questionnaires are repeatedly sent to the same research units but by different senders. Coordination through a networked approach is clearly the way to go, and we will make this one of our policy priorities for the coming months and years.

As said before, we also need to increase the firsthand field knowledge of those charged with policy preparation. We therefore intend to set up a mobility program, which would allow the temporary exchange of staff among administrations, funding agencies, universities, public research institutes, higher-education institutes, and companies. Such an approach will make participants actively aware of the peculiarities of the “other” and often unknown environments. It will also greatly reduce the number of superfluous rules when designing new research programs or initiatives. Ultimately, greater mutual understanding is also a major contribution to innovation.

All actors in the Flemish research area also stand to benefit from up-to-date online statistical information; for example, on the number of publications and patents, scientific staff, or external contract revenues. This kind of information is not only necessary as an input for international data collection by international organizations but is also a valuable instrument for the government to monitor the impact of its science and innovation policy. Flanders has already taken steps in this direction. The Department of Economy, Science, and Innovation publishes in English and Dutch an annual budgetary overview on science and innovation in its Science, Technology and Innovation Information Guide. The Policy Research Centre for R&D Statistics has been entrusted with the biannual publication of the Flemish R&D Indicator Book. The next issue is planned for this year. As part of the recently approved action plan Flanders i2010, we will embark on the creation of an integrated online database with all relevant R&D data.

Given its strong and close international contacts, Flanders also stands to gain a lot from exchanging information and best practices with partners abroad. There are several instruments that help us in this effort. The European Commission has set up ERA-NETs, OMC-NETs, and INNO-NETs with the specific aim of enhancing innovation expertise and capacity in national administrations. At a bilateral level, Flanders engages in “innovation dialogues” with the Netherlands, Wallonia, and the United States.

After more than 15 years of continuous increases in public R&D spending, the Flemish funding system is reaching a state of completion; most of the funding instruments for curiosity-driven research, strategic basic research, and innovation are in place. The challenges ahead are to streamline these instruments, reducing overlaps and remaining obstacles, and to raise their effectiveness in tackling the innovation paradox. In this context, international policy-learning is extremely valuable, and this will be one of the priorities for the coming years.