The European Union’s (EU) Lisbon Agenda’s strategy was to turn Europe into the world’s most competitive and dynamic knowledge economy by 2010, mostly by encouraging an increase of spending by members on research and development. The movement appears to be losing momentum, even though research shows that the top 1,000 EU companies increased spending on R&D by an average of 5.3% in 2005.

According to the tenets of the Agenda, member states are supposed to be investing 3% of their overall gross domestic product in research. Most are falling short of this figure, with the exception of Finland and Sweden.

The Center for European Reform in its annual scorecard on the Lisbon Agenda gave the EU a grade of D for innovation, worse even than the C minuses of the four preceding years.

Some experts, like the four-member group led by Esko Aho, a former prime minister of Finland, have recommended initiatives to foster innovation in Europe that would encourage private-sector investment and a more favorable overall business environment. Other experts like Iain Begg, visiting professor at the European Institute of the London School of Economics, say that the main obstacle to innovation is the deeply entrenched protectionism present in certain industries. Some industries have the scope for innovation, but because they are protected, they don’t feel the need to innovate. Companies that are forced to compete in order to survive tend to innovate more rapidly.