Draghi’s recommendations — and where they fall short
Draghi calls on Europe to focus on disruptive innovation, better integrate digital and green transitions, and boost security. This would involve improved management of the public investment portfolio, greater risk-taking, market-based scaling, and better coordination.
Europe will need to find its own way, learning from what works in other places, but not accepting other models uncritically. The experiences of the US and China show that strong innovation alone doesn’t guarantee widespread prosperity or mitigate social issues like political instability, low rates of education, and lagging public health.
Bold investment for Europe requires more than just “better coordination.” Governance grounded in openness, responsiveness, and participation is key to align investment reforms with the EU’s model of solidarity and cohesion in the long run.
A good governance model for R&I policy
The following section explores three key strategies to ensure that R&I policy in the EU aligns with good governance principles and practices. To address the issues raised by the Draghi Report, the EU can consider improving co-governance at the strategic portfolio level, encouraging risk-taking and public communication about such risks, and strengthening market integration with public oversight.
1. Co-govern at the strategic portfolio level
Where and how decisions are made — and who makes them — is crucial. Currently, European R&I investment starts at the EU level, but member states set their own spending priorities, leading to fragmentation. This hinders coordination and network effects. Horizon Europe, the EU’s main R&I funding program, is criticized for being too scattered and complex, making it difficult for breakthrough ideas to gain traction.
Where decisions are made matters. Successful industrial policy (which includes R&I) is known to manage investment at more strategic, or portfolio, levels, rather than at the individual project or firm level, allowing funders to quickly jettison failing projects and support emerging successes. Spreading R&I funding across member states through block grants can undermine the strategic goals of the investment — and, by extension, competitive ambition, including from the private sector.
Positive examples of collaborative governance (or co-governance) of long-term investments, like CERN and EuroHPC, show what’s possible. This level of public-private collaboration needs to be institutionalized beyond isolated initiatives, around key portfolios like AI, climate, and energy. This could take many forms, such as a centralized CERN-like body for advanced AI and regional R&I hotspots that member states, innovators, and experts can join to focus on emerging tech like quantum technologies or topics like cancer and infectious diseases.
Who decides matters too. Co-governance for strategic investment must also build in informal and formal avenues for ensuring independent oversight and feedback loops to societal needs, market realities, and policy priorities. This is especially important for transformative sectors experiencing high degrees of uncertainty, such as climate and technology. Such feedback loops can take the form of independent, forward-looking advisory boards. One example is the European Scientific Advisory Board on Climate Change, which is set up to offer scientific knowledge, expertise, and advice relating to climate change. Such forward-looking bodies should be organized with a mandate to guide both investment and policy and to enable agility, rigor, and sustainability in strategic decision-making.
2. Encourage risk-taking and public risk communication
The Draghi Report shows that high-risk investment is comparatively small. This makes sense, considering the EU’s historical focus on peace and cooperation. However, taking greater economic risks will require political stability and resilience, both of which are under strain.
For greater and riskier investment to succeed, the EU must build and nurture trust through transparency, accountability, and public participation. Governing bodies need a clear mandate to manage and communicate risks effectively. As risk psychologist Gerd Gigerenzer points out, understanding risk is one thing, but communicating it is another. Public scrutiny is vital to prevent vested interests from exploiting isolated failures and to ensure long-term support for innovation.
High-risk, high-reward fields like nextgen nuclear power, where Europe was once the global leader but now faces strong headwinds, will require public buy-in. The European Innovation Council, inspired by the U.S.’s DARPA and ARPA-E to support disruptive innovation, can help. The council offers promise but needs significant budget increases to compete globally — and, crucially, a more agile approach to managing its innovation portfolio, with higher bars for public transparency and participation to foster public trust. The regulatory sandboxes being set up across member states under the EU’s new AI Act also offer promise to innovators and regulators to experiment with risk-taking in a new regulatory environment. But these sandboxes need strong guidance from the EU and oversight by the public to avoid fragmentation and ensure AI innovation is democratic by design.
Ultimately, how the EU and its member states bring the public and non-government experts into responsible risk-taking is essential for sustainable competitiveness. Standing bodies, such as the European Scientific Advisory Board on Climate Change mentioned above, can help foster public trust by communicating the importance of risk-taking and receiving public input to ensure that, ultimately, innovation and policy priorities are driven by societal needs and that governments and citizens continue to reap its benefits.
3. Strengthen market integration with public oversight
The Draghi Report calls for rethinking governance structures overall, especially for market integration. This means allowing innovators to scale across member states. This is particularly important for public goods like clean technologies, defense procurement, and energy transmission, which require multinational collaboration.
However, licensing, permitting, security exchanges, and intellectual property rights are still controlled by member states, leading to delays. For example, hundreds of electricity projects are tied up due to slow permitting and grid connection processes. While a few permitting reform advocates point to loosening health and environmental safeguards, especially for infrastructure, there remain numerous “win-win” efficiencies to be found in administration, financing, and regional planning processes. These efficiencies can be found by involving others in decisions — not only industry members, but also advocates working to strike a balance. Consequently, the solution is not to reduce public participation but to prioritize it at the strategic level, away from individual project approvals. Spain and Germany have led the way with regulatory changes that streamline public involvement in strategic planning. The EU’s Green Deal Industrial Plan also seeks to universalize similar reforms by removing regulatory roadblocks at the national and local levels, though achieving this will require concerted cross-national efforts.
Similar examples of embedded participation of market integration exist in the Canada-US-Mexico Agreement, which includes processes for public participation in trade negotiation and a complaints mechanism. Within the Open Government Partnership, numerous countries have undertaken similar processes of administrative simplification using the tools of public participation, from Serbia to Peru and from the United Kingdom to Chile, including trade. While these are not perfectly analogous toward the task ahead of the EU, they can be instructive.
A new, inclusive industrial strategy
To secure sustainable competitiveness, Europe needs a forward-looking industrial strategy that enables big bets on high-impact technologies. Again here, funding and coordination alone are not enough. Europe must adopt a model of good governance that connects the research pipeline to the needs of industry and society, creating strong partnerships between governments, private companies, investors, and members of the public. This will help build public trust, increase regulatory agility, and nurture regional industrial champions.
Without good governance, bolder investment can undermine Europe’s competitive ambitions. Stronger market integration and tighter public oversight is especially important as competitors outside Europe — including those who do not share Europe’s values — continue to seek control over strategic industries, sponsor cartels and monopolies, and steal intellectual property. Ultimately, Europe must couple bold investment with more strategic collaboration, responsible risk-taking, and accountable markets. Otherwise, greater and riskier R&I can ultimately exacerbate fragmentation, inefficiency, corruption, and social and environmental costs, while eroding public trust.
This governance model can serve as an inspiration for other regions. Emerging tech sectors in Africa, Latin America, and elsewhere can also benefit from policies that reduce friction between research, industry, policy and, ultimately, society — fostering the growth of trustworthy local innovation ecosystems.
