Knowledge and innovation are the engines of sustainable growth and key factors for Europe to retain its competitive advantage. Such thinking lies behind the Lisbon Agenda, which states that investment in RD&I is fundamental for: job creation and long-term growth; improving competitiveness and productivity; supporting the Continent’s social model; and addressing international challenges.

A new report by IESE’s International Center for Competitiveness (ICC) states the case for companies to carry out research, development and innovation (RD&I), highlighting three important socio-economic benefits.

It boosts productivity and competitiveness. Competitiveness, according to the World Economic Forum, is the set of institutions, policies and factors that determine a country’s level of productivity, which, in turn, determines the level of sustainable prosperity that an economy can achieve.

It influences the skill level of a country’s workforce. The more invested in RD&I, the more qualified the workforce, and the greater the supply of scientists and engineers. What’s more, investment in RD&I leads to closer cooperation between universities, resulting in the development of specialized centers to support their projects, thus averting “brain drain.”

It enhances a country’s image abroad. RD&I is factored into international rankings that measure a country’s overall attractiveness, such as the E-readiness index of the Economist Intelligence Unit, or the European Innovation Scoreboard devised by the European Commission. In the latter, for instance, Spain’s image gets a score of 0.31, below the European average of 0.45.

Spanish Companies Bring Up Rear
Does Spain invest enough in RD&I? Not by a long shot, say the authors. One of the goals of the Lisbon strategy was for private-sector investment in RD&I in Europe to reach two-thirds of all investment in RD&I by 2010. It’s not there yet.

Spain, in particular, is behind other major countries, both in overall investment (1.35 percent of GDP, compared with an average 1.84 percent for the rest of Europe), and in the percentage of companies that invest. Although this latter figure is considerable (more than 47 percent of all companies), again it is below the E.U.-27 average (54.6 percent).

However, investment in RD&I in Spain is starting to rise, which shows the growing commitment of the government and the private sector to improve the situation.

Foreign MNCs: Why Spain Needs Them
Though RD&I by foreign multinationals in Spain hasn’t grown at the same rate as that of the business sector as a whole, it has increased in recent years. Foreign multinationals, which represent less than 2 percent of all companies in Spain, account for more than 26 percent of all business-sector investment in RD&I.

Such figures indicate the crucial role that foreign multinationals play in RD&I investment in Spain, and underscore the importance of ensuring that the country can continue to rely on this contribution.

These companies’ participation enhances the general benefits of investing in RD&I, such as lifting Spain’s image internationally. For instance, the technology that Hewlett-Packard develops in Spain turns up all over the world – from mapping devices used at New York’s Ground Zero to print-on-demand kiosks in London’s National Gallery.

Winning international awards also boosts the country’s image. For example, the RD&I center of ThyssenKrupp Elevadores was the first to receive the Canadeka certification for RD&I collaboration between Spain and Canada.

Multinational investment also fosters connections with wider RD&I networks. A child nutrition project, for example, coordinates projects of the European Union with a dozen projects being carried out with various Spanish universities.

Recommendations to Enhance Appeal
The ICC report analyzes the criteria that multinational companies use when deciding to invest in a country, and recommends two specific actions for Spain to focus on.

Collaboration between universities and the corporate sector. Carry out research that serves both parties’ interests. Do not limit the territorial parameters of RD&I centers, so as to extend the reach of joint projects. Offer incentives to university professors who get involved with companies.

Aid for RD&I. Rules and regulations should be made more flexible, so that tax breaks are possible and opportunities are not lost because of the particular structure of multinational companies’ RD&I centers in relation to local sectors.