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Multibillion-euro innovation hub slammed by auditors

Damning report blames failure to deliver on goals on management problems and funding issues.

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An ambitious initiative to fuel innovation in the European Union has swallowed up enormous amounts of money, but has little to show for the investment, its auditors say.

Backed with almost €3 billion in EU cash, the European Institute of Innovation and Technology (EIT) was established in 2008 to stimulate economic growth in the EU by transferring research and innovation from academia into commercial applications. But the institute is a long way from achieving its goals, according to an audit report released on 14 April.

"If the EIT wants to become the groundbreaking innovative institute it was originally conceived to be, significant legislative and operational adjustments are required," says Alex Brenninkmeijer, the member of the European Court of Auditors who chaired the team behind the report.

The auditors identified management problems, ill-suited short-term grants and potential conflicts of interest. They recommend, among other things, that the EIT’s funding model be thoroughly revised.

The EIT had a rough start. It was first suggested by former European Commission president José Manuel Barroso in 2005 as a centralized research powerhouse to rival the Massachusetts Institute of Technology (MIT) in Cambridge. Critics countered that an institution built from scratch could never mimic the success of MIT. The compromise that emerged — a distributed network of academic and business partners — has failed to convince many experts.

“The EIT’s design hasn’t been properly thought out,” says Helga Nowotny, a science-policy adviser to the Austrian government and former president of the European Research Council. “It makes a lot of sense to improve entrepreneurial spirit and education, especially at technical universities. But stimulating actual innovation by adding more bureaucracy where less is needed just doesn’t work.”

KIC-ing off

The institute operates through what are known as Knowledge Information Communities (KICs): groups of universities, research institutes and businesses working in specific technologies. Three initial KICs, set up in 2010, cover information and communication; sustainable energy; and climate-change mitigation and adaptation technologies. KICs agreed in 2014 will target health products and services for ageing societies, and innovative raw materials for industrial use, but these are too recent to be included in the audit. The funding that KICs get from the EIT is limited to 25% of their overall costs — the rest must come from other sources. According to the KIC business plan, participants can apply for money to conduct research on new technologies or prototype products, for instance a novel energy-storage device or a diagnostic assay, or for education and training.

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 failure to deliver has to some extent been result of the “limited leadership abilities” and high staff turnover, including at senior management level, the auditors say. Despite financial checks and reporting requirements, the actual performance of beneficiaries is poorly demonstrated, there is a lack of transparency and possible conflicts of interest. The survey of the KICs revealed that project partners are sometimes involved in reviewing funding proposals in which they themselves stand to benefit.

The European Commission, which is funding the EIT, and the EIT’s management have accepted most of the criticism and say that they will promptly address the concerns. The management has already begun to modify project administration processes to improve transparency and ease red tape, the report acknowledges.

“We agree with this report’s important finding and recommendations,” says Martin Kern, the Budapest-based interim director of the EIT. “But we have moved on since, and we have already addressed many concerns.”

Since he took office in 2014, Kern has set up a task force to streamline administration. He also asked all EIT-funded collaborations to focus more on results and impacts.  Meanwhile, the KICs have adopted principles of good governance to prevent any conflicts of interest. “We will monitor that issue very closely,” he says.

Because its task is to navigate activities where market failure is the norm, the EIT deserves another chance, says Kurt Deketelaere, the Leuven-based secretary-general of the League of European Research Universities, a partnership of 21 top universities. “Many of our members have been complaining about the EIT,” he says. “But if existing concerns are properly addressed, I am confident that after all those years we are heading in a direction where it may finally deliver.” 

Others are not so sure. “Something that problematic shouldn’t be that big,” says Paul Nightingale, deputy director of the of the science policy and research unit of the University of Sussex in the UK. “Any researcher, especially in poorer EU countries, will know lots of things that would provide much better value for money than a mostly ineffective innovation scheme.”

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