Europe in the Intelligent Age 2025

The investment and innovation environment no longer seems at par with other regions As a matter of fact, European corporations earn about one-third lower returns on invested capital than their competitors domiciled in the US.19 For a similar business opportunity, European companies face higher regulatory restrictions and cost, and a more limited upside, not least due to fragmentation and barriers to scale. Restoring the European investment environment will require leadership from both the private and public sectors to address well-known challenges and work towards six key outcomes: overcoming fragmentation to enable scale, simplifying and speeding up the regulatory and permitting environment, increasing innovation capital and investment, driving commercialization, strengthening research and talent, and cultivating ecosystems and global leaders. But the one issue that is top of mind among chief executive officers (CEOs) and entrepreneurs and would need to be addressed first and foremost, is to create a more conducive landscape to scale up innovative businesses in Europe. The value at stake is higher than healthcare, defence and Net Zero spending combined The value at stake may dwarf spending on many European priorities in the long run. Already over the past decades, the tech sector alone has contributed around 0.4 percentage points more to productivity growth in the US than in the EU.20 Europe’s current slow pace of tech investment and adoption puts more than €2 trillion to €4 trillion in value-add at stake annually by 2040.21 This amount exceeds Europe’s annual healthcare22 and defence spending,23 as well as funding requirements to reach Net Zero.24 Failure to close gaps could impact Europe’s standard of living, values and safety25 (Figure 3). Technology assessment methodology BOX 1 To assess Europe’s starting point per technology domain, this paper analyses three datasets: investments, research publications and patents. For each measure, a defined set of data sources is used to find occurrences across a set of over 1,000 keywords associated with the 14 technology domains: –Investment. Data on private-market and public-market capital raised (venture capital and corporate and strategic mergers and acquisitions (M&A), including joint ventures), private equity (including buyouts and private investment in public equity), and public investments (including initial public offerings (IPOs)) are sourced from PitchBook, cumulative over the period 2018-2023. –Research publications. Data on published research articles is sourced from Lens, cumulative over the period 2018-2023. –Patents. Data on patent filings is sourced from Patsnap, highlighting only the number of granted patents, cumulative over the period 2018-2023. In addition to these metrics, this paper relies on interviews with subject-matter experts and facilitated dialogues with over 40 industry leaders across technology domains. This was calibrated against the data analysis to formulate the scoring of Europe’s starting point on a scale of 1 to 5. Europe in the Intelligent Age: From Ideas to Action 8