THE HORIZON EUROPE PROGRAMME AND THE NEXT DIGITAL TECHNOLOGIES GENERATION

THE HORIZON EUROPE PROGRAMME AND THE NEXT DIGITAL TECHNOLOGIES GENERATION

Vittorio Emanuele Agostinelli - Consulta giovanile del Cortile dei Gentili

IL PROGRAMMA HORIZON EUROPE

E LE TECNOLOGIE DIGITALI DELLE NUOVE GENERAZIONI

Horizon Europe è il principale programma di finanziamento dell’UE per la ricerca e l’innovazione con un bilancio di 95,5 miliardi di euro. Affronta il cambiamento climatico, contribuisce a raggiungere gli obiettivi di sviluppo sostenibile delle Nazioni Unite e stimola la competitività e la crescita dell’UE. Il programma facilita la collaborazione e rafforza l’impatto della ricerca e dell’innovazione nello sviluppo, nel sostegno e nell’attuazione delle politiche dell’UE, affrontando al contempo le sfide globali. Sostiene la creazione e una migliore diffusione di conoscenze e tecnologie eccellenti. Crea posti di lavoro, coinvolge pienamente il bacino di talenti dell’UE, stimola la crescita economica, promuove la competitività industriale e ottimizza l’impatto degli investimenti all’interno di uno spazio europeo della ricerca rafforzato. Una fetta importante del futuro delle piccole e medie imprese è data dalla digitalizzazione. Quali tipi di caratteristiche aziendali determinano l’uso di una qualsiasi delle tecnologie digitali delle prossime generazioni?

1. The Horizon Europe programme1

Horizon Europe has a budget of EUR 95.5 billion for the period from 2021-2027. This includes EUR 5.4 billion from the Next Generation EU instrument, particularly to support the green and digital recovery from the COVID crisis. The budget is divided amongst four pillars and 15 components to create a programme that will support all the areas of Research and Innovation: excellent science, global challenges and industrial competitiveness, innovative Europe and widening participation and strengthening the European Research Area.

Horizon Europe is complemented by the Euratom 2021-2025 research and training programme. The Euratom Programme will pursue nuclear research and training activities with an emphasis on the continuous improvement of nuclear safety, security and radiation protection, as well as to complement the achievement of Horizon Europe’s objectives. This programme has a budget of EUR 1.4 billion over the period 2021- 2025, bringing the total budget available for both programmes to EUR 96.9 billion.

The EU budget has been significantly rising over time from EUR 3 271 million in FP1 to EUR 96 899 million today for Horizon Europe and Euratom. This illustrates the clear ambition of the EU for its main R&I funding instrument and increases relevance of science and technology in society to address our challenges.

This budget compares favourably with the previous programme, Horizon 2020. In real terms, and excluding the participation of UK beneficiaries in Horizon 2020, there is a 30% increase. This demonstrates the broad consensus on the key role of Research and Innovation in accelerating Europe’s green and digital transformation, strengthening Europe’s resilience and preparedness to face future crises and supporting Europe’s competitive edge in the global race for knowledge. The development of the budgets of the Research Framework Programmes is shown in table above.

The budget will be used to support research and innovation across the European Union and Associated Countries, being paid directly to researchers, innovators and research institutions in the Member States and Associated Countries. Funding will mostly be through grants. The selection of projects to fund will mainly be through open calls for proposals, selected according to excellence, impact and the quality and efficiency of implementation. There is no fixed distribution by country or region. The programme will be administered by the European Commission, its Executive Agencies, and a range of legal entities established as Union Bodies.
Whilst grants under pillars 1 and 3 will mostly be to one beneficiary (monobeneficiary schemes), grants under pillar 2 will be mostly to a transnational consortium of beneficiaries, thus ensuring that researchers and research organisations from different countries collaborate with each other.

The programme will also support investments in European Partnerships (up to 50% of the budget of Pillar 2), which are collaborations with Member States or industry to support particular research agendas, and missions (up to 10% of the Pillar 2 budget for the first 3 years).

The programme is intended to be open to the world, and the participation of legal entities established in third countries and of international organisations is promoted, based on mutual benefits and the Union’s interests. This goes along with the formal association of a number of countries to the programme. These associated countries will make contributions to the programme, generally in line with their level of participation in it. These contributions increase the budget of the programme, allowing for greater investment in research and innovation.

2. The diffusion of the next generation digital technologies and the SMEs 2

There exists a surplus of well-established literature on the determinants of digital technology use. Specifically, studies using firm-level data have shown that certain types of firms exhibit increased propensities of technology adoption over others. Traditional digital technologies are especially large-firm biased. Large firms are likely to have more knowledge-based capital and more accumulated technology, making it easier for them to adopt emerging technologies (Gibbs and Kraemer, 2004). The use of modern technologies by large firms may have triggered dynamics that have benefitted a minority of leading frontier firms, further widening disparities across businesses (Calvino et al., 2016; Brynjolfsson et al., 2008). For example, enterprise resource planning (ERP) software is attractive to large multinational entities, as it allows them to coordinate and profit from substantial production net- works (OECD & World Bank, 2015).

Being classified as a young firm has also been identified as a relevant determinant of technology use. Theoretically, young firms are likely to have newer assets, which are often more compatible with newer technologies.

The literature has typically found that investments in Research & Development correlate with new digital tools. Innovation outcomes have been linked with technological diffusion. In parts of Europe, research has established a clear relationship between product and service innovation, and digital technology deployment. In the U.S., a survey of managers revealed that 3D printing can springboard innovation and boost firm performance. Emerging technologies benefit from holistic roadmaps. This indicates that strategic frameworks for technology facilitate specific system approaches that are more apt to adopt and increase innovative activities.

The diffusion of frontier digital technology corresponds with firms becoming increasingly more reliant on assets like data, highlighting the significance of intangible investments in new digital technologies. Firms that are foreign-owned typically exhibit increased levels of productivity and technology utilization. Foreign direct investment literature finds extensive evidence of knowledge spillovers from foreign multinational entities. Multinationals often require and uphold strict productivity and production standards and may therefore readily share new technologies throughout the firm.

The literature identifies several attributes important for the adoption of next generation digital technologies: size, productivity, Research & Development activity, intangible intensity, being young and being owned by a foreign firm.

An interesting analysis held in South Korea shows that after analyzing firm characteristics, larger firms are more likely to employ an NGDT. Both total sales and the number of employees are positively associated with the use of at least one NGDT. In general, larger firms appear to have a comparative advantage in generating returns on innovation activities and considerable resources to leverage new technologies. Young firms on the other hand are more likely to employ advanced technologies potentially as a result of less rigid organizational structures and newer capital stock or because they are more willing to take innovative risks.

The use of intangible assets appears to be a strong determinant of NGDT use. More productive firms also exhibit a greater likelihood of using NGDTs, which corresponds with the literature on previous digital technologies. Although less concrete, more R&D active firms use NGDTs, albeit only at the 10% level of significance in the Probit estimation and a positive coefficient yet insignificant in the OLS estimation. This does not diminish the importance of firm innovation on NGDT use, especially given that R&D is only one way to measure innovation (as an input as opposed to an output, say by patent applications or new product/service interventions).

Overall, the results suggest that the use of an NGDT is biased towards large and young firms that exhibit both high productivity and use intangible assets. While this is consistent with the use of previous digital technologies, what remains unclear is whether these characteristics matter, and if so, how impactful these are for each of these technologies. It is possible that some of the technologies are simply more applicable to smaller firms, such as cloud computing, and have less to do with size, productivity, or asset use.

The diffusion of new digital technologies such as AI, IoT, big data and 3D printing is expected to have economic and social implications. Despite the prevalence of anecdotal evidence, there are limited empirical studies on the extent to which these technologies are being used by businesses.

The analysis suggests that firm size, labor productivity, investments in intangible assets and being young are strong predictors of NGDT use in general, consistent with the use of more traditional digital tools. The research also demonstrates that firms are not embedding these technologies in isolation. Among the firms that use these technologies, a considerable percentage employ two or more technologies simultaneously. Assessing this further, technologies that require and facilitate the use of large datasets, such as AI and cloud computing, are statistically linked with practices that generate large amounts of data (i.e., IoT, 5G and big data). In addition, there are complementarities in the use of robotics and data-intensive practices such as IoT, big data and AI, suggesting that the combination of data and industrial equipment is perceived by firms to be important for production.

The simultaneous use of multiple technologies is an essential determinant driving a firm’s decision to acquire any one technology. The resulting pattern highlights the need for researchers to exercise care when analyzing single technology usage because of a possible omitted variable bias. Unobservable factors outside of a standard firm’s characteristics are also important and can be significant. The results provide insights to managers who decide to use these advanced technologies and make investments in human capital and R&D.

Furthermore, the results suggest that policy- makers need to encourage the adoption of multiple technologies rather than incentivizing the use of one particular technology. Firms use a variety of technology combinations that are both available as services and through investments, which suggests that traditional policy tools such as capital incentive programs (targeting investments in physical capital) may have unexpected outcomes.

NOTE

1 Publications office of the European Union, 2021, https://op.europa.eu/en/publication-detail/-/publication/1f107d76-acbe-11eb-9767-01aa75ed71a1

2 Technovation journal, 2023, What’s driving the diffusion of next-generation digital technologies, https://www.sciencedirect.com/science/article/pii/S016