UE 216 Oral d’économie Nom 

: Miron Alina

Devoir V

N : 0G5DRJ2TZ06

1. Sum up in approximately 15 lines the main ideas defended in this letter.

The major problem of the European Commission has been to find an appropriate policy to boost the
development of clusters in Europe. Clusters seem to be the adequate solution in developing a framework
for creating a comparative advantage. The main purpose has been to catch clusters as the Silicon Valley,
which animated companies listed on the stock market with values of $90 billion.

The European policy is different from the one of China or the U.S. To change this approach, the UE has
allocated €308 billion for structural funds and proposed a new strategy which should be followed between
2007 and 2013. The principles for its implementation are evoked in a chart for clusters.

A solution seems to have been the creation of a Special Innovation Zones in Europe (SIZE). It is vital to
identify the competitive clusters and allocate the funds accordingly.

Moreover, it’s important to adopt policy-rules that would allow clusters to develop, to stimulate
immigration, to benefit from human capital without great efforts and to have access to legislative facilities.
The transparency and international competition are advantages to be acquired.

The EU has decided to create a council dominated by non-EU experts in technology, development and
education so as to have an alternative solution: The European Research Council.

It decides to allocate €300 million of funds according to the decision of international experts. The most
innovative applicants were chosen after a harsh analysis. Government investments in truly innovative
projects could attract foreign resources. The EU needs to catch up with the rest of the world to solve
problems as the global warming and the increase in energy costs.

2. Answer the following questions.

a. Compare Europe’s approach to clusters with the American approach. How can we account for the
different approaches?

First and foremost it should be mentioned hat European clusters are mainly based on technology and
industry being more developed in areas such as: health, energy and aerospace.

On the one hand US clusters have developed spontaneously, whereas the European ones have been, in
general, driven by strong public incentives.

However, two exceptions could be stated: Cambridge and Oxford which have had a genesis based on the
North American model of the eighties.

An important part of the new projects correspond to indentified systems with proven characteristics
related to concentration and density, business links and a beginning of collective organization. Clusters

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incorporate three basic functions: academic, technological and financial resources (through venture capital
funds). It is not enough to have universities and strong entrepreneurs if you don’t have large companies to
give them orders (they will bring entrepreneurial spirit and management capabilities).

Moreover, Europeans have tried to create the same environment for the development of clusters but they
didn’t take into account an important factor: the culture. They tried to reproduce the American spirit of
innovation but significant differences were identified in areas such as the culture, managerial skills and
politics.

If in the US companies work with research laboratories from all areas, in Europe there is only a form of
collaboration. In fact, we can’t speak of a true collaboration as long as enterprises and universities are still
hesitant in working together.

Furthermore, the salary offered to the brightest brains is lower if compared with the one provided in the
US. Consequently, researchers prefer the American clusters. The US has decided to develop an economy
based on intangible assets. They have concentrated the efforts on three areas: the human capital, the
intellectual capital and the health capital. Nonetheless, Europe has also started to focus on intangible
assets, but it needs to measure the assimilation level of this kind of economy (vision). However, for
European organizations, the investment in intangible assets is treated as an operating expense.

Taxes are higer in Europe in comparation with the american ones. The European Union must find a solution
to slash the taxes on income and on capital gain. In USA is more easy and cheaper to create and to develop
an entreprise. Moreover, legislation concerning immigration and labour is more permessive.

In Europe, venture capital is virtually nonexistent. With easier access to capital, money is cheaper in Silicon
Valley than in Europe.

b. What are the principles of Special Innovation Zones? What should European politicians do regarding
clusters?

The Science Business Innovation Board is a forum organized by the Science Business news service to share
their views and set out policy recommendations, and supported by Microsoft Corporation. The EU’s
upcoming cluster policy statement found a solution to create bold clusters in Europe. After several
researches and tests they have published a charter for clusters with the receipt to follow for creating
successful clusters: to build clusters on existing strengths (without regard to political interests), to use the
resources for the most promising regions, to encourage competent people to work in Europe’s clusters, to
distribute funds after appropriate evaluation, to encourage investors to take risks and scientists to
innovate.

The appropriate solution to implement these principles seems to be the creation of special innovation
zones in Europe (SIZE).

Some of the main objectives of a special innovation zone are to: create a profitable business arena, simplify
business start-up, create employment, spur economic trade growth & competitiveness, develop export
economy, streamlined logistics & supply chain, attract foreign investments, minimizing taxation regulatory
policy and foreign exchange burden etc.
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The European politicians must define some clusters (most powerful clusters where the effort would have a
greater impact) and allocate funds in those areas to stimulate the development of the innovation zones.
Not only capital is important but also low-tax policies to encourage enterprises to accept these ideas (on
the one hand we need big companies with knowledge management and one the other hand we need small
enterprises with brilliants ideas). The government must incite investments with a low-tax policy and offer
facilities in order to attract in those areas highly intelligent persons.

They must eliminate the social, legal and regulatory barriers like:

 constructors encounter local building code barriers that forbid daring projects
 it may also be difficult to change the district energy plans in some zones
 the creation of new free inventions or distribution of free utilities can cause a decrease of fees and
some may resist
 companies may need an infrastructure that people do not agree and vice versa
 banks and investors may be reluctant to fund new business ideas that depend on government
policy

The EU should take measures to remove these obstacles if they want to improve Europe’s ability to
innovate.

c. The urgent problems of global warming and rising energy costs are mentioned in the text.

What is the link between those problems and the issue of clusters?

Global warming is an increase in the concentration of greenhouse gases in the atmosphere leading to an
increase in the amount of infrared or thermal radiation near the surface. Most scientists agree that an
increase in the average temperature of the earth’s atmosphere, especially a sustained one, is sufficient to
cause an important climatic change.

On the one hand we must find solutions to slow global warming. Meanwhile, on the other hand the
depletion of energy resources bring to the fore the issue of non-renewable resources.

Could economic growth, power imbalance, also represent the solution of our problems?

We may also emphasize that global food situation is an unstable equilibrium, in which the production
barely copes with demand, and grain production can not cover a growing human population. But the
human population will grow anyway, and the production of cereals for human consumption is threatened
by three different factors: livestock for meat, global warming (and the decline in oil) and, last but not least,
the production of bio fuels.

The fact of caring for future generations introduced the idea of fairness in the development. That fairness
involves states, citizens and businesses.

Global warming and rising energy costs are the most pressing problems of the entire planet and clusters
seem to be the solution for then due to the fact that it encourages innovation and research. The solution
to these problems relies only on the help of scientists, the government (by allocating funds) and investors.

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It is urgent to find concrete solutions that contribute to a sustainable development and reduce the impact
of human activities on global warming: reduce the energy requirements of manufacturing processes,
reduce energy dependence of businesses and individuals via including the development of renewable
energy and cogeneration; reduce the negative consequences of the processes of production and
consumption on air pollution, water and soil; reduce energy consumption especially in buildings.

In the past, these kinds of researches were made by governments and public laboratories. Nowadays,
governments are trying to stimulate companies to search a solution for the major problems of the
humanity. Due to the lack of time researches are recommended to be made in the development of
renewable energy sources. The goal is to discover renewable fuels and a way to reduce the consequences
of global warming, to reduce electricity and water consumption. Finding new ways to save energy and
water is getting harder each year. The solution could be found through out researches, innovations and
entrepreneurship. Nonetheless, it is also imperative to find modified cereals to resist to global warming.

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