Innovation, Skills and Investment: A Digital Industrial Policy for Europe

This paper identifies the main factors for Europe’s delays in embracing the well proven growth enhancing effects of digital technologies. It argues that market failures, including externalities from knowledge spillovers, cybersecurity and first mover advantages justify public support. The whole value added chain of digital production is entailed, starting with infrastructure investment and R&D relevant for digital sectors, along with qualified skills of researchers and of workers, coming to skill sets provided by the education sector. Emphasis is put on the efficient leverage effects that can be achieved by combining public and private sector funds through financial instruments.