EU tech spending not paying off, study finds

The government's science and technology strategy may be, at least in part, doomed to failure, according to new research presented yesterday to the Economic and Social Research Institute (ESRI).

The study, conducted by London School of Economics economist Susanne Mundschenk, shows that expenditure on high technology communications had no positive impact on overall productivity in the European economy.

The Lisbon Agenda - a set of policy measures including steps to encourage greater use of information communication technology (ICT) - was agreed by the EU in March 2000. Prompted by concern about the EU's economic performance relative to the US, it set out to make the EU the most competitive knowledge-based economy in the world by 2010.

Between 1996 and 2002, total economic productivity grew by 1.3 per cent in the EU, compared with 2.3 per cent in the US, according to the research findings presented yesterday.

But only extra spending in ICT-producing sectors had any effect on overall economic productivity, Ms Mundschenk said, and these were not strong enough to affect aggregate results.

While smaller EU countries such as the Republic, Finland and Sweden were more successful than larger countries in turning investment in ICT into productivity, this might be due to the presence of large high technology companies.

She added that trying to make nations behave like firms was problematic. "Competitiveness has a different meaning for a large economic area like the EU than for a firm or sector. While carmakers compete in the international car market, this analogy is less clear at the level of nations."

Ms Mundschenk said that even if her findings were incorrect, the Lisbon Agenda objectives might not be attainable.

"If the ICT impact is not measurable, then Lisbon objectives are unattainable. If ICT is measurable, we still fail the Lisbon objectives because small countries are at the driving wheel, the effects do not show up in time and the ICT-using sector is just not as efficient as the US sector."