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Europe's Risky Specialization Away from Digital Technologies

Gilles Babinet - Oliver Coste

Jan 5, 2023

Institut Montaigne publishes the second part of our analysis of Europe's situation in Tech

In the first article for Institut Montaigne on the digital gap of Europe, both authors used 8 charts to illustrate how the continent was lagging behind competitors in the tech space. This second chapter examines Europe's dangerous specialization away from digital technologies, and the economic and geopolitical risks this could bring. 

Europe's underperformance relative to the US and China is specific to tech and not found in other economic sectors. Quite the contrary: Europe is an innovative continent where companies invest significant resources in research and development (R&D). These companies are global leaders in sectors that materialized during the Second Industrial Revolution (automotive, aerospace, energy, food processing, chemicals, etc.). 

The following chart illustrates this paradox: Europe invests considerably more in mature industries than in tech (80% vs 20% of its total R&D investments respectively). In contrast, the United States has focused significantly on tech, directing over 50% of its total R&D investments into the sector...

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