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How entrepreneurial innovation programs count during times of adversity – a European perspective. By Lothar Stadler, August 2020.

The Covid-19 pandemic is making its mark throughout the world, serious economic consequences can hardly be estimated, companies introduced short-time working and many draw comparisons with the period of reconstruction work after the Second World War. Nevertheless, optimism is also noticeable, and it is often said that every crisis also offers opportunities. But does this also apply to innovations?

1) What impact does a crisis have on innovations?

Crises generally have a negative effect on economic development.

Let us take the financial crisis of 2008/2009 as an example for comparison. With the beginning of the financial crisis in 2008, many countries and companies around the world faced financial challenges (Donatiello & Ramella, 2017). Although countries reacted with investment incentives in a first step, many companies were forced to follow suit with cost cutting and restructuring.

Globally, the economic output (GDP) of the most important economic nations, comprising 37 OECD countries, fell by just under 2% between 2008 and 2009. In Europe (EU28) a decline of 2.1% was recorded. In 2010, the values of 2008 had already been caught up again, in Europe they even were 1.45% higher than in 2008.

But what are the implications of drawing a parallel with innovation? Expenditure on research and development can be used as indicators of innovative strength and technological progress.

Figure 1 shows the impact of the financial crisis in 2008/09 on global R&D. Starting from 2008, 1,093 billion USD were spent on research and development worldwide. In 2009, this was reduced to 1,079 billion USD, a decrease of 1.13%. In 2010, global R&D spending was already back at the previous level of 2008. In the US and Europe, R&D spending remained virtually unchanged during the crisis.

Compared to the decline in global economic output, R&D spending therefore declined only slightly during the financial crisis. The question therefore arises as to whether crises are really a strong barrier to innovation, or perhaps even an accelerator of it. We therefore look at a second comparison parameter: patent applications.

Patent applications are an indicator of the degree of innovation. It is therefore necessary to analyse how the financial crisis of 2008/09 specifically affected the development of patent applications at the European Patent Office. In Figure 2 we see the steady development of European patent applications from the 28 EU home countries of inventors. Over the last 15 years, patent applications from all EU28 nations averaged 65,000 per year.

It is particularly interesting to see how visibly the financial crisis of 2008/09 had an impact on patent applications. As if signalled, patent applications fell by 5.7% in 2009, rose by 7.6% in 2010, and then fell again until the figures in 2013 settled at pre-crisis levels. The picture was similar in the US. There were fewer patent applications in 2008 and 2009, and then sharp increases again.

The data show that the financial crisis had a negative short-term effect on the number of patent applications. In a long-term view, patent applications worldwide rose again over the last decades. In 2019, the total number of patent applications in Europe reached a record high of 181,406, with about 45% originating from European countries. 72% of patent applications came from large companies, 18% from medium-sized companies and 10% from universities. The leading technical fields in 2019 were digital communication, medical technology and computer technology (figure 3).

Thus, crises also have an effect on patent applications, which leads to the following conclusion: First, patent applications are mainly borne by large companies. Secondly, inventions need a lot of time for development, but also for the formulation of patent claims. Therefore, crises can have a temporal effect on patent applications, as can be seen in the spike of the application curve. The curve also shows that many innovations were launched during the main crisis period in 2009, which was reflected in the number of patent applications shortly afterwards.

Based on the previous figures alone, the hypothesis that times of crisis have a particularly positive effect on innovation is not supported. Rather, it is shown that European patent applications are roughly parallel to economic development, both in terms of gross domestic product (GDP) and R&D expenditure. Thus, it can be seen that all curves rise slightly again over the years and that crisis effects compensate each other over decades.

The OECD (Organisation for Economic Co-operation and Development) concluded that although the global financial crisis of 2008/09 had a negative impact on business innovation and R&D, there were many different degrees of variation in the performance of countries, industries, companies and types of innovation. (OECD, 2012).

However, despite all economic and cyclical adversities, crises contributed significantly to extraordinary developments. Numerous pieces of evidence show that periods of extreme difficulties also led to innovations and the founding of new companies. For example, 18 out of 30 companies in the 2010 Dow Jones Industrial Index were founded during an economic downturn (Chakravorti, 2010). Disney, Microsoft, Hewlett-Packard and Oracle were also founded during an economic downturn. (OECD, 2012)

The Kauffman Indicators of Entrepreneurship (Kauffman.org) shows that the number of start-ups in the US was higher in the deepest recession of 2009 than in the 14 previous years, including the technology boom of 1999-2000.

Scott D. Anthony, a leading US strategy consultant, said in a 2009 Harvard Business Review that he was grateful for the 2008 crisis, because instead of killing the innovation wheel, it forced a state of mind that made it turn even faster. He argued that the years 2005-2010 would go down in history as years of truly important innovations (Scott, 2009). Historic innovations from 2009 included (Sutter, 2009):

SpaceXFalcon1: the first satellite of a private operator was successfully launched into space

Smartphone technologies were connected to “real-time” internet

Pratt&Whitney: 15% more fuel-efficient aircraft engines

iPS cell technology – Reprogramming of cells gave hope in cell therapy

Moments of crisis have historically always contributed to giving strong impulses for innovation. This can be seen when looking back further in history, be it the Manhattan Project, the first moon landing, problem-driven innovations in the wake of the energy crisis of the 1970s, or the emergence of environmental initiatives in the last decade (Chakravorti, 2010, Taalbi, 2017). They all have one thing

The data show that the financial crisis had a negative short-term effect on the number of patent applications. In a long-term view, patent applications worldwide rose again over the last decades. In 2019, the total number of patent applications in Europe reached a record high of 181,406, with about 45% originating from European countries. 72% of patent applications came from large companies, 18% from medium-sized companies and 10% from universities. The leading technical fields in 2019 were digital communication, medical technology and computer technology (figure 3).

Thus, crises also have an effect on patent applications, which leads to the following conclusion: First, patent applications are mainly borne by large companies. Secondly, inventions need a lot of time for development, but also for the formulation of patent claims. Therefore, crises can have a temporal effect on patent applications, as can be seen in the spike of the application curve. The curve also shows that many innovations were launched during the main crisis period in 2009, which was reflected in the number of patent applications shortly afterwards.

Based on the previous figures alone, the hypothesis that times of crisis have a particularly positive effect on innovation is not supported. Rather, it is shown that European patent applications are roughly parallel to economic development, both in terms of gross domestic product (GDP) and R&D expenditure. Thus, it can be seen that all curves rise slightly again over the years and that crisis effects compensate each other over decades.

The OECD (Organisation for Economic Co-operation and Development) concluded that although the global financial crisis of 2008/09 had a negative impact on business innovation and R&D, there were many different degrees of variation in the performance of countries, industries, companies and types of innovation. (OECD, 2012).

However, despite all economic and cyclical adversities, crises contributed significantly to extraordinary developments. Numerous pieces of evidence show that periods of extreme difficulties also led to innovations and the founding of new companies. For example, 18 out of 30 companies in the 2010 Dow Jones Industrial Index were founded during an economic downturn (Chakravorti, 2010). Disney, Microsoft, Hewlett-Packard and Oracle were also founded during an economic downturn. (OECD, 2012)

The Kauffman Indicators of Entrepreneurship (Kauffman.org) shows that the number of start-ups in the US was higher in the deepest recession of 2009 than in the 14 previous years, including the technology boom of 1999-2000.

Scott D. Anthony, a leading US strategy consultant, said in a 2009 Harvard Business Review that he was grateful for the 2008 crisis, because instead of killing the innovation wheel, it forced a state of mind that made it turn even faster. He argued that the years 2005-2010 would go down in history as years of truly important innovations (Scott, 2009). Historic innovations from 2009 included (Sutter, 2009):

SpaceXFalcon1: the first satellite of a private operator was successfully launched into space

Smartphone technologies were connected to “real-time” internet

Pratt&Whitney: 15% more fuel-efficient aircraft engines

iPS cell technology – Reprogramming of cells gave hope in cell therapy

Moments of crisis have historically always contributed to giving strong impulses for innovation. This can be seen when looking back further in history, be it the Manhattan Project, the first moon landing, problem-driven innovations in the wake of the energy crisis of the 1970s, or the emergence of environmental initiatives in the last decade (Chakravorti, 2010, Taalbi, 2017). They all have one thing

The data show that the financial crisis had a negative short-term effect on the number of patent applications. In a long-term view, patent applications worldwide rose again over the last decades. In 2019, the total number of patent applications in Europe reached a record high of 181,406, with about 45% originating from European countries. 72% of patent applications came from large companies, 18% from medium-sized companies and 10% from universities. The leading technical fields in 2019 were digital communication, medical technology and computer technology (figure 3).

Thus, crises also have an effect on patent applications, which leads to the following conclusion: First, patent applications are mainly borne by large companies. Secondly, inventions need a lot of time for development, but also for the formulation of patent claims. Therefore, crises can have a temporal effect on patent applications, as can be seen in the spike of the application curve. The curve also shows that many innovations were launched during the main crisis period in 2009, which was reflected in the number of patent applications shortly afterwards.

Based on the previous figures alone, the hypothesis that times of crisis have a particularly positive effect on innovation is not supported. Rather, it is shown that European patent applications are roughly parallel to economic development, both in terms of gross domestic product (GDP) and R&D expenditure. Thus, it can be seen that all curves rise slightly again over the years and that crisis effects compensate each other over decades.

The OECD (Organisation for Economic Co-operation and Development) concluded that although the global financial crisis of 2008/09 had a negative impact on business innovation and R&D, there were many different degrees of variation in the performance of countries, industries, companies and types of innovation. (OECD, 2012).

However, despite all economic and cyclical adversities, crises contributed significantly to extraordinary developments. Numerous pieces of evidence show that periods of extreme difficulties also led to innovations and the founding of new companies. For example, 18 out of 30 companies in the 2010 Dow Jones Industrial Index were founded during an economic downturn (Chakravorti, 2010). Disney, Microsoft, Hewlett-Packard and Oracle were also founded during an economic downturn. (OECD, 2012)

The Kauffman Indicators of Entrepreneurship (Kauffman.org) shows that the number of start-ups in the US was higher in the deepest recession of 2009 than in the 14 previous years, including the technology boom of 1999-2000.

Scott D. Anthony, a leading US strategy consultant, said in a 2009 Harvard Business Review that he was grateful for the 2008 crisis, because instead of killing the innovation wheel, it forced a state of mind that made it turn even faster. He argued that the years 2005-2010 would go down in history as years of truly important innovations (Scott, 2009). Historic innovations from 2009 included (Sutter, 2009):

SpaceXFalcon1: the first satellite of a private operator was successfully launched into space

Smartphone technologies were connected to “real-time” internet

Pratt&Whitney: 15% more fuel-efficient aircraft engines

iPS cell technology – Reprogramming of cells gave hope in cell therapy

Moments of crisis have historically always contributed to giving strong impulses for innovation. This can be seen when looking back further in history, be it the Manhattan Project, the first moon landing, problem-driven innovations in the wake of the energy crisis of the 1970s, or the emergence of environmental initiatives in the last decade (Chakravorti, 2010, Taalbi, 2017). They all have one thing 

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