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3 reasons why US companies set up R&D activities Flanders

What makes Flanders a hotspot for R&D and innovation? Luc Strybol—Flemish Economic Representative at Flanders Investment & Trade in New York—shares his views. This opinion article first appeared on LinkedIn.

“In the corporate jungle, it’s survival of the innovative. R&D is crucial to a company’s growth and competitiveness, tying together every element of a business strategy, from marketing to productivity and cost-effectiveness. But reaping these rewards doesn’t happen overnight. Companies need to make smart investments—in terms of time, money, knowledge and effort. The secret sauce? I believe it boils down to three ingredients: access to an interconnected and cross-sector R&D community, highly qualified talent and a range of financial incentives.

Throughout the years, I’ve seen corporations from the US and beyond take advantage of these requisites for R&D success in Flanders, the small but vibrant region in the north of Belgium. Recently, two American titans—Johnson & Johnson and Pfizer—injected millions into their local operations. These corporate juggernauts have been fans of Flanders for decades, and they’re not alone. In 2016, the region hosted 34 investment projects originating from the US, totaling $642 million, a staggering $264 million of which went to R&D. Here’s what made Flanders the sweet spot for these investments:

No.1—Smart community

The intersection of ideas from different backgrounds is where innovation happens. For your R&D efforts to pay off, you’ll need an environment that fosters collaboration between the public, private and academic sectors.

In Flanders, companies gain access to an R&D ecosystem that does just that. Despite being larger than just two American states (Delaware and Rhode Island), the region is home to 4 strategic research centers that are supported by the government. Working with local universities, their research covers novel fields. While imec specializes in nanoelectronics and digital technology, VIB yields breakthroughs in life sciences and biotech. Flanders Make innovates in product and process technology, whereas VITO zooms in on energy, materials and environment.

Add to that a vast network of knowledge institutes for various industries and a cluster policy that boosts long-term, cross-sector R&D collaborations, and it’s no surprise that Flanders’ research system claims 4th place in the European Commission’s 2016 Innovation Scoreboard. The same source also ranks Flanders #1 for industrial-academic linkages and entrepreneurship—further highlighting that research is ‘open for business’ in the region.

In Flanders, companies gain access to an R&D ecosystem that fosters collaboration between the public, private and academic sectors.

No.2—Smart people

The more knowledge-intensive your company’s activities, the more crucial the war for talent becomes to its success. To optimally kick-start your research and incubate your product and process development and innovation, you’ll have to find highly-educated people with the right set of skills and knowledge.

Numerous sources confirm that the education system in Flanders endows employees and researchers with the necessary technical and scientific competencies to develop innovative products, solutions, processes and technologies. Not only does the region’s education system rank 4th worldwide in the WEF’s Global Competitiveness Report 2016-17; it’s also highly science-oriented.

This is highlighted in last year’s results from the OECD Program for International Student Assessment (PISA). Flanders secured the #1 spot in Europe for mathematical skills, and 8th place globally. And when it comes to scientific knowledge, the region ranked 3rd within Europe and 11th worldwide.

Flanders’ highly-educated workforce attracts some of the biggest multinationals. Take Johnson & Johnson, for example. In early 2017, the pharma giant announced its plans to funnel over $42 million into the construction of a state-of-the-art laboratory in the region. But it’s the investment in people that makes this project truly remarkable. No fewer than 250 scientists, lab technicians and other staff will use the new facility to develop both existing and novel medicines and therapies.

Flanders’ highly-educated workforce attracts some of the biggest multinationals.

No.3—Smart financing

R&D comes with a high price tag, that’s no secret. In addition to a qualified workforce and a knowledge community that transcends sectoral boundaries, companies are increasingly seeking cash grants and tax incentives to enable R&D success.

Putting itself more firmly on the map in this regard, Flanders is boosting its R&D investments to reach 3% of its GDP—funneling an additional EUR 500 million into innovative projects before the end of the legislative period in 2019.

What’s more, since February 2017, companies investing in Flanders can free up to 85% of their net innovation incomes from corporate taxation. Yes, you read that right. In fact, Flanders offers several other financial initiatives to help companies be more innovative—including a payroll tax incentive for employing academic staff and researchers, a tax credit for R&D investments, and more.

Flanders is boosting its R&D investments to reach 3% of its GDP.

About the author

Luc Strybol has been working for Flanders Investment & Trade since 2002, starting off as Flemish Economic Representative in Berlin. From 2009 to 2014, he held the same position in Warsaw. Since 2014, Luc is based in New York City.

20 April 2017

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