How to improve Europe’s position in Global Network?

First of all the firms require to careful map and assess the
benefits and risks before venturing into the outsourcing/
offshoring game.
Lets us now address the challenges faced by Europe needed to
be carefully taken up by national and European policy makers
which are the factors that will help EU.

Challenge 1: Inward and outward mobility of highly skilled

workers. Global innovation networks and interactions between
firms are at the end of the day interactions between people,
implying mobility of highly skilled workers. However, there is
still in Europe an important deficit in some specific knowledge
areas, and immigration laws are not generally open enough, or
generous enough to make Europe an attractive working place.
Following the success of Silicon Valley (USA) which has been
largely related to its ability to stimulate ‘brain circulation’, or
the constant inward and outward flux of innovators,
researchers and entrepreneurs, who have created very strong
business and innovative links between their country of origin
and the firms located in the Valley . This should be an
inspiration for Europe.

Challenge 2: A single and cost-effective patent system in

Europe. A second crucial aspect related to global innovation
networks are the regulations concerning intellectual property,
and in particular patent regulations. Operating in global
innovation networks puts considerable focus on the
appropriability and ownership of the knowledge coproduced
and/or exchanged within the networks. The knowledge that is
subject to appropriability needs a clear and cost-effective
regulatory framework to reduce legal uncertainties and to
maximize the returns of key investments. Unfortunately this is
still not the case in Europe. In spite of decades of efforts to
simplify and to reduce barriers, the patent system in Europe is
still fragmented and very expensive to firms.

Challenge 3: Improving knowledge capabilities. We know

that firms’ ability to absorb knowledge produced outside is
largely associated with the firms’ own knowledge capabilities in
the first place. Recent studies have shown that this is the case
for European firms’ involvement in innovation networks. This
calls for a strong and bold policy effort to enhance the
knowledge capabilities of firms in Europe. One way is to focus
on achieving the objective of 5% of GDP in R&D expenditures,
and to strengthen the resources and the autonomy of research
activities conducted at universities. Availability of risk-willing
capital and strong research-oriented universities will make
European innovation environments more attractive worldwide,
hence turning it into a true global hub in knowledge-intensive
activities, becoming a genuine attraction pole to highly
specialized, research and innovation-related firm activities, and
linking strongly with knowledge sources produced outside
Europe.
4) Retain & attract knowledge intensive activities.

EU needs to regulate its degree of internationalization of R&D,

and their firms’ participation in global innovation networks.

Europe has to gear all its EU-level and national-level policy

efforts to make Europe a true global hub in knowledge-
intensive activities, becoming a genuine attraction pole to
highly specialized, research and innovation-related firm
activities, and linking strongly with knowledge sources
produced outside Europe.

Improving Government Policies:

Also the EU should do more to promote a strategy of industrial

innovation based on an educated workforce. Workers must be
allowed to develop their abilities and collaborate in a more
secure environment. Failure to implement this strategy could
undermine European industry’s competitiveness.

More importantly economic factors, such as, wage differences

between countries can drive offshore outsourcing.
This is naturally connected to the corporate cost-savings
objective, though wage differences alone are not necessarily a
sufficient precondition for achieving cost savings.
Second, Political factors may drive offshore outsourcing, e.g.
labour legislation, which is also related to costs, may act as a
driver.

Political factors, such as tax incentives, is linked to the cost-

savings issue. Within the European Union, for instance,
companies are encouraged to invest more in R&D by tax
incentives. This kind of tax incentive can, therefore, hinder
offshore R&D outsourcing. R&D tax incentives usually provide
for a reduction of the cost of research by reducing the amount
of corporate tax paid. Thus corporates will spend less on tax
and hence can afford the expertise of it’s own domestic IT
professionals and so this would solve the problem of job losses.

Third, socio-demographic factors, e.g. improving education

level and work force motivation, at home may improve EU
firm’s condition and hence need for outsourcing would
eventually lessen.