Europe is engaged in a competition measured not just in military arsenals but in research infrastructure, data centres, laboratories, and classrooms. The decisive vector of power in the twenty-first century is knowledge: those who generate it, retain it, and convert it into innovation set the pace for growth, security, and social cohesion. In this landscape, universities are not merely educational institutions—they are strategic infrastructure. If Europe aspires to genuine technological sovereignty, it must reinvest boldly and systematically in its higher education system.
The connection between universities and competitiveness is self-evident: basic science fuels discovery, and discovery drives industry and economic dynamism. Where this virtuous cycle operates smoothly, innovation clusters emerge—magnetic poles attracting talent, capital, and leading firms. Where it breaks down—through unstable funding, bureaucratic inertia, or disconnection from the real economy—productivity and growth inevitably lag behind more agile competitors.
The challenge confronting Europe is stark and quantifiable. Between 2019 and 2024, productivity per hour worked in the euro area rose by a mere 0.9 per cent, compared with 6.7 per cent in the United States, according to the European Central Bank (ECB). Europe produces world-class science—its researchers publish prolifically and win prestigious awards—but struggles to translate that knowledge into productivity gains and commercial innovation. The technological frontier—artificial intelligence, quantum computing, biosciences, advanced materials—is advancing at breakneck speed, and those who master these domains will shape the economic and geopolitical order of the coming decades.
The innovation gap
Part of this performance gap is financial. Europe invests approximately 2.3 per cent of Gross Domestic Product (GDP) in research and development, compared with 3.4 per cent in the United States and even higher levels in South Korea and Israel. This massive shortfall translates directly into diminished innovation capacity and competitive disadvantage. The World Intellectual Property Organization reports that Europe now accounts for only about 10 per cent of global high-impact international patent applications, a share that continues its steady decline.
Technology transfer remains a structural weakness that hobbles European competitiveness. European universities generate roughly three times fewer spin-offs per capita than their American counterparts, according to the European Innovation Scoreboard. Academic incentives remain stubbornly tied to publication metrics rather than commercialisation success. The problem is not talent—Europe produces exceptional scientists and engineers—but translation: the absence of robust bridges between laboratory and marketplace. These missing links include patient capital willing to nurture long-term projects, professional technology-transfer offices with commercial expertise, and a risk culture that rewards bold experimentation rather than punishing inevitable failures.
When universities operate at their full potential, they function as triple-mission platforms—dynamic centres of education, research, and technology transfer. They orchestrate complex ecosystems, linking scientists with entrepreneurs, hospitals with engineers, governments with venture capitalists, and public demand with frontier solutions. Where this orchestration succeeds, universities become powerful economic accelerators. Regions such as Bavaria, Île-de-France, and the greater Amsterdam area, where universities and research institutions are densely concentrated and well-connected, exhibit labour productivity 20 to 25 per cent above the European average—demonstrating the tangible economic returns of academic excellence.
The United States has perfected a virtuous circuit connecting public research investment, private capital markets, and commercial demand. Fourteen of the world’s twenty most innovative universities are American, according to Reuters rankings. Public procurement—often channelled through defence agencies, the National Institutes of Health, or the Department of Energy—acts as crucial early-stage demand for emerging technologies. Europe need not slavishly copy this model, but it must internalise its fundamental logic: focus resources on strategic priorities, achieve scale in critical domains, and accelerate the pace from discovery to deployment. In the United States, universities are treated as national assets essential to economic competitiveness and security. Europe should embrace the same strategic perspective.
A historic opportunity
Yet the current moment offers Europe an unprecedented window of opportunity. Major changes now under way in American higher education—affecting federal research funding priorities, the attraction and retention of international talent, and the capacity to sustain frontier research across disciplines—are fundamentally reshaping the global academic landscape. For the first time in decades, Europe has a genuine chance to emerge as the world’s leading destination for scientific talent and breakthrough research. This historic opportunity will require serious, sustained investment in both the broader academic ecosystem and the specialised research architecture that underpins technological advancement.
Reinvesting in higher education means embracing a comprehensive sovereignty-of-knowledge agenda. Europe needs stable, countercyclical research funding that maintains momentum through economic downturns; innovative public procurement mechanisms that prioritise European solutions while spurring competition; and a genuine single market for talent that allows researchers to move seamlessly across borders. The European Commission estimates that the European Union will require 20 million additional digital specialists by 2030—a target utterly unreachable without dramatically stronger and more responsive universities.
Universities are also the crucibles where the workforce for the green and digital transitions is forged. Europe urgently needs flexible curricula that adapt to rapidly changing skill requirements, comprehensive lifelong learning programmes that enable workers to reskill throughout their careers, and close partnerships with business to expand programmes in artificial intelligence, cybersecurity, advanced manufacturing, renewable energy systems, and circular economy practices. Raising Europe’s productivity frontier depends fundamentally on raising its skills frontier—and diffusing those skills rapidly through small and medium-sized enterprises, public administrations, and local innovation ecosystems.
Europe already possesses the scientific excellence, human talent, and democratic values necessary to succeed in the knowledge economy. What it now requires is strategic coherence and political ambition to transform its universities into engines of a new project for shared prosperity and technological autonomy. Reinvesting in higher education is not merely a sectoral policy concern—it represents a continental choice to compete effectively in the geopolitics of knowledge. If Europe aligns funding mechanisms, regulatory frameworks, and performance metrics toward that overarching goal; if it transforms universities into powerful engines of technology transfer and business scaling; and if it seizes the current opportunity to attract and retain global talent, it can once again compete as an equal with those nations operating at the technological frontier.
This is a joint column with IPS Journal
Manuel Muniz is Provost of IE University and a Professor of Practice of International Relations.
