Europe is now at risk of missing out on the Deep Tech Revolution, falling behind the US and China when it comes to innovation in various technologies, Francis de Véricourt writes.
ADVERTISEMENTHistorically, China stood out as a leader in technology and innovation, often surpassing Western advancements.
Throughout the 18th century, China’s development matched that of Britain in terms of literacy, life expectancy, and GDP.
Within Chinese culture, there is even the concept of The Four Great Inventions, discoveries from ancient China celebrated for their historical significance as symbols of advanced technology: the compass, gunpowder, papermaking, and printing. It took centuries for these to reach Europe.
Then came the transformative impact of the Industrial Revolution, accelerating economic growth and life expectancy throughout Europe and the US.
However, although leaps and bounds ahead of Europe throughout much of history, China missed out on the Industrial Revolution that transformed Europe in the 19th century. Why?
Trading places
The development of pre-industrial technologies often involved trial-and-error, changing or combining existing technology until reaching a desired outcome without necessarily understanding how it worked. These solutions were low-tech.
Scientific thinking allowed people to understand how the world around them worked, limiting the need for trial and error. This birthed a science-based approach focusing on technologies most likely to work: deep tech innovation.
Whilst Europe was engaging in, and benefitting from, deep-tech innovation, China continued to rely on low-tech trial-and-error. This led to a significant development gap as Europe propelled forward with developments such as mechanised textile making, steam engines, and iron making.
Despite being considered a global powerhouse of innovation just a century ago, 21st-century Europe finds itself in a similar position to that of China at the dawn of the Industrial Revolution.
Europe is now at risk of missing out on the Deep Tech Revolution, falling behind the US and China when it comes to innovation in various technologies.
The gap becomes obvious even to the naked eye
Over half of recently established deep tech companies are found in the US, and in 2022, $51 billion (€46.6bn) was invested into US deep tech – more than double the European investment of around $20bn (€18.3bn).
Particularly, this gap is seen in AI. Investment in AI for 2024 in the US is estimated to be around $100bn (€91.4bn) – 50 times that of Europe if you consider the generous estimate of $2bn (€1.8bn). China is also rapidly catching up with Europe, investing significantly more in technologies such as autonomous mobility and generative AI.
This gap is also visible in funding for SpaceTech. In the US, NASA and the Department of Defence invested more than $62bn (€56.7bn) in 2022; government support in China in the same year totalled $12bn (€11bn).
The ESA’s annual budget for 2024 still does not approach these previous investments for the US and China, amounting to around €7.79bn.
The innovation lag in Europe comes from complacency, believing scientific achievements would inevitably result in innovation and foster economic growth.
However, deep tech innovation cannot be guaranteed through science alone. Interestingly, a report from November 2023 finds 95% of Europe’s patents remain inactive, never finding their way into companies or products.
Lacking a deep tech mindset
The impact of complacency could be seen during the Industrial Revolution. Despite Britain and France both demonstrating similar overall development, the Industrial Revolution emerged in Britain.
The influence of Newtonian science on British society, scientific principles, and laws, provided British industrialists, engineers, and entrepreneurs with practical problem-solving techniques.
ADVERTISEMENTFrench scientific thinking remained abstract with limited practical applications. France was exhibiting a scientific mindset but lacked a deep tech mindset, unable to translate scientific discoveries into practical innovations.
Similarly, Europe’s current lag in the deep tech revolution is not due to a lack of scientific research. If considering the number of scientific publications per capita, Europe is as accomplished as the US and ahead of China, yet hindered by economic and political factors.
Firstly, Europe lacks systems that foster modern, deep-tech ventures, impeding collaboration between business and science. Secondly, European investors and institutions overseeing significant funds are often risk averse, limiting the novel, innovative deep tech ventures receiving investment.
Finally, the large home markets of the US and China provide a huge advantage of scale. For example, the US and China together are predicted to hold 30% of the world’s data by 2030, vital for developing AI technologies.
We can't afford to fall behind
Despite Europe also holding valuable data, it needs to learn how to effectively pool this data together, something it currently struggles with.
ADVERTISEMENTThese factors are compounded by successful European ventures often relocating to the US, taking their capital and expertise with them.
This is understandable as entrepreneurs who move to the US tend to experience higher success rates and increased funding.
Deep tech innovation has the potential to drive significant long-term economic growth, with regions that fail to harness this power falling behind.
If Europe doesn’t foster and invest in deep tech ventures or learn how to efficiently translate its own research into impactful innovations, it risks missing out on the most recent transformative revolution.
Francis de Véricourt is Professor of Management Science, Joachim Faber Chair in Business and Technology, and founding Academic Director of the Institute for Deep Tech Innovation at the European School of Management and Technology (ESMT) Berlin.
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