European innovation stagnates. Analysis of the EIS 2025

European innovation stagnates. Analysis of the European Innovation Scoreboard, EIS 2025. [1]

The annual EIS 2025 report is now in its 25th edition since its first pilot edition in 2000. The last five summary publications presented on this website were:

The full EIS 2025 report can be found at:

See complete Report EIS 2025

Conclusions

The first relevant aspect of the report is that the EU innovation index will decline for the first time in 2024. A slight decline of 0.4%, but significant because it ends the trend toward stagnation starting in 2022-2023. Over the last seven years, it has seen a moderate increase of 12.6% overall, but it has stopped growing since 2023.

Compared to the other global innovation leaders, the following graph shows the evolution of the European Innovation Index since 2018:

Europe was no longer in a very favourable position in 2018, but its performance has been worse than the others except for Japan. To more clearly understand the differences between the seven areas and their change in recent years, the following table shows that the EU’s gap with the other global leaders has increased compared to the rest, especially with China, by more than 32%.

The second column of the table indicates the % growth of the innovation index compared to the 2018 value; that is, the total growth over the last seven years. The second column expresses the difference in each country’s index, also in %, compared to the EU. As mentioned, only Japan’s gap with the EU has narrowed. Although Europe had already overtaken Japan in 2023 and 2024, they have coincided again in 2025.

A first analysis of stagnation

This analysis includes the European Union (EU) and other European countries also included in the EIS, such as Switzerland, the United Kingdom, and Norway, among others.

A first approach to the root causes of this stagnation in Europe in recent years will be analyzed, firstly, along what I believe to be two main lines: a geographic one, and a conceptual one based on the indicators that make up the index. We analyze these indicators according to the four areas and 12 dimensions, according to the methodology used to calculate the EIS index.

Geographic differences:

The European index is a measure of a set of states, and the results reflect the average. States have very different policies and developments regarding innovation. These differences mark a strong dividing line between innovative countries (blue in the graph) and those that are little or moderately innovative (brown). These differences in the index between countries do not narrow, or do so only very slightly, over time.

The division is clearly evident in the following maps: the first by state, including those in the EU and other European countries, and the second, in a more complex way, by regions included in the RIS 2025 (Regional Innovation Scoreboard) report.

See: RIS 2025

There is a concentration effect in certain clusters recognized as innovation hubs. The following table shows the ranking of European clusters included in the “Top 100 Innovation Cluster Ranking 2025 of the Global Innovation Index.” The top clusters in each European country have been highlighted in color, with additional data available in the final columns. In the case of Spain, there are two clusters: Barcelona is the first, at 45th, and Madrid is 47th in the global ranking.

If we view the clusters as hubs, on the regional map we will see that they are all located in larger areas considered “innovation leaders” or “strong innovators” to varying degrees. There are two exceptions in France and Spain, where we can see Paris and Madrid as islands in a setting of moderately or not very innovative areas. This “centralizing capital” effect does not appear in the other countries.

Second, we can see the evolution of each state since 2018 in the following graphs. The length of the blue arrows represents their increase in the index from 2018 to 2025. First, on the left, the EU countries, and on the right, the comparison with global competitors. In the latter, only European countries with an Innovation Index above the EU average have been included.

Some observations can be drawn.

In the EU, in many cases, the growth of the index in countries with low or moderate innovation does not reach or is similar to that of the most innovative or leading countries. There is no convergence.
Only Estonia, with rapid growth, joined the “strong innovators” zone.
Among the shorter arrows, we find two “large countries,” Germany and France. This is affecting the whole EU performance
Therefore, it is very difficult, as an average across all states, growing adequately without a convergence of the less innovative countries and, at the same time, if large EU countries have low growth. This facilitates stagnation.
A similar case occurs with Japan.
Despite above, the innovation “leading” countries in Europe are still at the same or higher level than their global competitors. See the second graph where this group of countries, from Switzerland and Sweden to France and Estonia, are in this zone, but some of them, as mentioned for France and Germany, as well as Switzerland and Luxembourg, are clearly stagnating. In other words, the engines are failing.

Conceptual causes:

In the second main line of analysis, we find four reasons or causes of the decline or stagnation in the EU, when reviewing the twelve dimensions that make up the calculation of the innovation index. See Methodology at the end.

Intellectual Capital Assets. The European index value decreased to 80% of that of 2018. This includes new patent applications, new trademarks, and new designs for products and services.
Firm investments in innovation. Virtually zero growth since 2018. Includes firm investments in R&D, investments in innovation (non-R&D), and expenditure per person employed in firms active in innovation.
Stagnation across the entire “impacts or results of innovation” area, especially “Impacts on Sales and Employment” and “Impacts on Foreign Trade,” such as exports of high-tech or knowledge-intensive products and services (approximately 0% growth since 2018). Within this area, the exception is Resource and Personnel Productivity, with 30% growth since 2018, indicating that this productivity is increasing in the lower value-added product and service sectors.
Other twelve dimensions with low growth are: “Innovators” (practically, innovation in SMEs in products and processes), “Funding and Financial Support,” “Human Resources,” and “Attractive Research Systems,” all of which have shown low growth since 2018, between 5 and 12%.

We are therefore talking about eight of the twelve dimensions that make up the overall index in a weak situation.

For a complete study of the root causes, it would be necessary to delve deeper into each of the above points to find possible paths for improvement.

See datailed graphics.

What is progressing?

Virtually only in three dimensions: “IT Investments,” “Digitalization,” and “Links” (which include cooperation and alliances between innovative SMEs, public/private cooperation in publications, and HR mobility in science and technology).

In summary:

A bleak situation that can have several interpretations. In a subsequent article, we will present several of these interpretations for possible paths for improvement. We finded opinions mainly in three lines:

Deregulation and liberalization measures.
Concentration of efforts on environmental and clean energy sectors, and public support for these sectors and SMEs, to varying degrees.
Greater centralization of the EU, but with measures to reduce bureaucracy. The “Draghi Line”

Overall, the situation shows that very biased concepts of innovation have been followed towards (digital and technological) media. It is demonstrated that strong investments in digitalization (+42%) and the application of new IT technologies (+70%) alone are not sufficient to progress in innovation.

Other factors that promote innovation and that utilize these technologies will need to be further developed.

Increased investment by companies in innovation that represent:
Increased patents, creation of differentiated and global “trademarks” with an increase in the designs of new products, services, and processes
Increased R&D and investment in jobs with a high content of knowledge STEM
Easier and simpler startup creation and financial support. To create collaborative networks and alliances between SMEs to achieve optimal size. And for this collaboration and alliances to extend to networks between different countries, overcoming language and legislative barriers.
All this with an improvement in human and intellectual capital and productivity in the highest value-added sectors.

EU Results

There are few changes in the country ranking. Only three countries have changed groups: Croatia moves up from emerging to moderate innovator, Hungary and Cyprus move down from moderate to emerging.

Spain drops one place in the list of 27, from 14th to 15th, and remains in the “moderate innovator” group behind Malta, Slovenia, and Italy.

As a composite index, the EU Innovation Score aggregates multiple indicators and dimensions, many of which have evolved unevenly over time.

Between 2024 and 2025, the EU’s performance has improved by five dimensions and decreased in the remaining seven.

See detailed Graphics

The most significant increases were observed in the dimensions of Investment in Information Technology (+14.5 percentage points), Resource and Labor Productivity (+12.4 percentage points), and Digitalization (+9.7 percentage points).

On the other hand, the EU experienced a significant drop in the Linkages dimension (-10.1 percentage points) since 2024. This is mainly due to the decline in the job-to-job mobility indicator for human resources in science and technology, which decreased by 23.5 percentage points between 2024 and 2025.

Another dimension that experienced a considerable decline was the Innovators dimension, with a decrease of -7.5% between 2024 and 2025. Both the proportion of SMEs introducing product innovations and those introducing business process innovations have decreased over the past year. The decline was most pronounced in SMEs introducing product innovations, with a drop of -12.2%.

At the level of individual indicators, EU performance has increased since 2024 in 13 indicators, remained stable in five, four indicators have decreased by more than 10.0%, and ten indicators have decreased by less than 10.0%.

The largest declines were recorded in venture capital spending (-23.6 percentage points) and labor mobility between RHCT jobs (-23.5 percentage points). EU venture capital as a percentage of GDP had already begun to decline the previous year, but this was only recorded in the EIS, as the indicator uses a three-year moving average. This was followed by a sharp drop in non-R&D innovation spending (-15.6 percentage points) and in the introduction of product innovations by SMEs (-12.2 percentage points), suggesting a weakening of innovative activity among small and medium-sized enterprises (SMEs). Declines were observed in PCT patent applications (-4.8 percentage points), employment in innovative companies (-4.4 percentage points), sales of new innovations to the market and in companies (-4.1 percentage points), the percentage of foreign doctoral students out of the total number of doctoral students (-4.1 percentage points), and SMEs introducing business process innovations (-3.2 percentage points).

Comparison with neighbouring European countries to the EU

Switzerland remains the most innovative country, although its index also reflects a slight decline.

Methodology

There are few changes to the methodology and structure of the index, which continues with 32 indicators grouped into four broad categories and 12 “Dimensions of Innovation” as in 2024.

The only changes are five of the indicators, according to the report, to better reflect the evolution of European R&D policy priorities. They are marked with the symbol * in the list.

Cloud computing assesses the proportion of companies using advanced online services, such as data storage, accounting, or customer management tools. It reflects the extent to which companies are adopting more advanced digital technologies. Replaces the indicator on companies offering training to develop or improve their staff’s ICT skills.
High-tech imports from outside the EU show a country’s dependence on non-EU countries for high-tech products and services. A higher proportion means greater dependence on external suppliers. Replaces the indicator on Sales of Product Innovations.
Output-based CO₂ productivity assesses the economic value generated for each unit of CO₂ emitted. A higher score implies greater efficiency and lower environmental impact. Replaces the measure of PM2.5 fine particulate air emissions in industry.
Labor productivity reflects the economic value generated for each hour worked. A higher score reflects greater efficiency and innovation-driven growth. Replaces the indicator for the development of technologies related to the environment:

[1] Source of data and images in this publication: EIS 2025 Final Report.