European Innovation Act: turning European ideas into European growth

Europe has no shortage of innovative ideas. Its challenge is turning those ideas into businesses, technologies and solutions that can scale. The new European Innovation Act, presented by the European Commission on 9 September 2026, aims to tackle exactly that problem: creating better conditions for European innovation to reach the market and grow within the EU.

Below, we look at the key changes proposed under the European Innovation Act and what they could mean in practice for businesses and public authorities.

Why has the EU proposed a European Innovation Act?

The European Innovation Act comes at a time when Europe’s ability to turn research excellence into commercial success has become a central competitiveness concern. The EU remains a global research powerhouse, but innovative companies can still struggle to secure finance, find lead customers, navigate fragmented markets and scale successfully across Europe.

For the Commission, the challenge is not funding alone. It is also about creating the conditions that allow innovations to be tested, validated and purchased. That includes better access to research and technology infrastructure, stronger cooperation between universities and industry, supply of talent, regulatory testing environments and more strategic public demand for innovation.

Addressing this innovation gap has therefore become a central part of the EU’s wider competitiveness agenda. Mario Draghi’s report on European competitiveness called for Europe to improve the commercialisation of innovation and make it easier for innovative companies to scale. The subsequent Competitiveness Compass made closing the innovation gap one of the EU’s three main priorities. The EU Startup and Scaleup Strategy further focused attention on creating better conditions for innovative companies to grow in Europe.

Against this backdrop, the Commission’s legislative proposal is relatively targeted. It focuses mainly on intellectual property (IP) and public research and development (R&D) procurement. On IP, the Commission proposes a voluntary EU-wide valuation framework, an IP marketplace and support for IP-backed finance. For many businesses and governments, however, the changes proposed for R&D procurement could have a more immediate strategic impact. In addition, the European Innovation Act is only one part of the EU’s wider effort to improve the conditions for innovation and investment, alongside initiatives such as the Public Procurement Act, the Industrial Accelerator Act and the Commission’s broader simplification agenda through the Omnibus packages.

How will the European Innovation Act change R&D procurement?

The Commission’s proposal creates a common EU framework for public procurement of R&D above €216,000. It covers the research, development and testing of innovative solutions and, in limited quantities, their first supply. It does not cover their later large-scale commercial purchase. This distinction matters because public authorities can be an important first customer for technologies that are not yet fully market ready.

Today, Member States use different approaches to R&D procurement, creating uncertainty for both public buyers and businesses. The Act aims to reduce this fragmentation through a harmonised EU procedure. Public buyers would consult the market before launching certain R&D procurements to better understand which solutions are available or being developed. They would also frame their requirements around what a solution needs to achieve, rather than prescribing a specific technology or design. This gives companies more room to propose innovative approaches.

Public buyers could also work with several suppliers and test competing solutions through different development stages. The proposal puts greater emphasis on quality and innovation when selecting suppliers: quality criteria would account for at least 50% of the total weighting and innovation-related criteria for at least 15%.

For businesses, this could create opportunities for solutions that compete on technical performance, environmental impact, resilience or a new delivery model – rather than simply on the lowest upfront price. The proposal also lowers certain barriers for SMEs, innovative start-ups and scale-ups through more proportionate financial requirements and reduced guarantees.

Will the European Innovation Act create a more European approach to innovation?

The European Innovation Act also aims to make R&D procurement more European in both scale and delivery. It creates a framework for public authorities from several Member States to pool their resources, form a buyers’ group and appoint a lead buyer to procure R&D on their behalf.  For businesses, this could provide access to larger projects and potentially several European markets at once. For governments, pooling demand can help share development costs and create the scale needed for more capital-intensive technologies.

At the same time, the proposal introduces an EU preference for R&D procurement. In principle, participation would be limited to companies established in EU Member States and certain countries covered by relevant agreements with the EU. Contractors would also need to carry out at least 50% of the R&D activities in these countries. Exceptions are possible, for example when there are too few suitable suppliers or when the restriction would result in disproportionate costs.

The strategic significance goes beyond individual tenders. The Commission wants public spending on innovation to contribute not only to solving public-sector challenges but also to building technological and innovation capacity in Europe. The proposal does not set a binding target for how much governments must spend on R&D procurement, but it does introduce criteria aimed at increasing the European value created through these contracts. Public buyers would consider factors such as whether a project strengthens European technology supply chains and innovation ecosystems, how much of the activity takes place in Europe and whether it builds on technologies developed in the EU.

This could be particularly relevant for companies working on technologies linked to EU strategic priorities, including competitiveness, climate and environmental objectives, resilience and economic security. For businesses with significant R&D activities in Europe, this could strengthen their position in future procurement opportunities. It also means that where companies carry out their R&D and how they organise partnerships and supply chains could become more relevant when competing for public innovation contracts.

What does the European Innovation Act mean for businesses?

For businesses, the European Innovation Act could make public authorities a more important partner in developing and validating new technologies. This is particularly relevant in sectors where innovations require substantial testing and investment before reaching commercial scale, including clean technologies, energy, mobility, advanced materials and industrial technologies.

Companies should therefore look beyond traditional grants and funding programmes when considering their EU innovation strategy. Public R&D procurement could offer a route to develop solutions with an early customer, demonstrate their performance and build a track record before wider commercial deployment. For companies with significant R&D capacity in Europe, the European preference could provide an additional advantage.

For companies, this changes how they can compete for public R&D contracts. Businesses would have an opportunity to engage with public buyers through market consultations before most tenders are launched, compete on the quality and innovative character of their solution rather than primarily on price and develop and test solutions through R&D contracts before they are commercially available at scale. When bids are assessed, price would carry less weight than in traditional price-driven procurement: at least 50% of the evaluation must be based on quality and at least 15% specifically on innovation. This could give companies with new or higher-performing technologies more room to compete, even when their solution is not the cheapest.

SMEs, innovative start-ups and scale-ups could benefit in particular, as the proposal also reduces financial guarantees and seeks to prevent requirements such as turnover history from unnecessarily excluding them from R&D contracts. For companies active in clean technology, energy, mobility, advanced materials or industrial innovation, this could become an increasingly important route from pilot to market.

What does the European Innovation Act mean for governments?

For governments and public authorities, the proposal changes both what they can procure and how they organise the process. Instead of defining a specific product or technology they want to purchase, public buyers can start with a problem that needs to be solved, consult the market and invite companies to develop competing solutions. They can work with several suppliers through different development stages and increasingly join forces with public buyers in other Member States. This could make procurement a more strategic tool for achieving policy goals, from decarbonising industry and energy systems to modernising mobility and public infrastructure.

However, the European Innovation Act is only one part of this shift. On the same day, the Commission also proposed a new Public Procurement Act, which would overhaul the wider EU framework for purchasing goods, services and works.

The two proposals address different points in the innovation journey. The European Innovation Act focuses on the earlier R&D phase: developing, testing and validating solutions that are not yet fully market ready. The Public Procurement Act concerns the wider commercial procurement market, including the purchase of solutions once they are ready for broader deployment. For innovative companies, the policy direction is therefore clear: the Commission wants public procurement to play a larger role both in creating first markets and in scaling strategic European solutions.

How will the European Innovation Act move forward?

Both proposals are at the beginning of the legislative process and their final shape will depend on negotiations in the European Parliament and among Member States. There is also reason to watch the negotiations closely. The Commission’s Regulatory Scrutiny Board issued two negative opinions on the Act’s impact assessment, raising questions around its interaction with the wider procurement reform, the evidence supporting some expected benefits and potential administrative costs. The Commission subsequently narrowed the proposal before presenting it. This suggests that some elements could remain contested as Parliament and Member States begin negotiations.

Overall, it is clear that the EU increasingly sees public procurement as a tool to stimulate innovation, rather than simply a way to purchase market-ready solutions. Public demand should help develop, test and scale innovative European solutions.

For businesses, this makes early engagement with public buyers, innovation partnerships and cross-border procurement opportunities increasingly important. For public authorities, it is an invitation to use procurement more strategically: not just to purchase solutions, but to help create them.