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Innovation in the European Telecom Equipment Industry

The European Innovation Monitoring System (EIMS) has published a report entitled "Strategies for the future: Innovation in the European Telecom Equipment Industry". The report, prepared for the European Commission (DG XIII) by MERIT (Maastricht Economic Research Institute on I...
The European Innovation Monitoring System (EIMS) has published a report entitled "Strategies for the future: Innovation in the European Telecom Equipment Industry". The report, prepared for the European Commission (DG XIII) by MERIT (Maastricht Economic Research Institute on Innovation and Technology), evaluates the innovative activities of the European telecom equipment sector (including line telephony, radio communication, and TV and radio broadcasting equipment).

Part One of the report examines publicly available data on production, trade, patents and technological trends, while Part Two presents the results of analyses of the 1993 Community Innovation Survey (CIS). The timing of the CIS survey provides a snapshot of conditions in the European telecom equipment sector before the liberalization and privatization of telecom services in most European countries.

The report reveals that European firms have a substantial position of strength in the global telecom equipment market. In 1994, four EU firms, Alcatel, Siemens, Ericsson and Nokia, ranked among the world's top ten telecom equipment manufacturers, while European firms as a whole had approximately 42% of the world market in 1990.

Some of the conditions on which the success of the European telecom sector is based are, however, changing, creating new hazards and market turbulence. The report highlights two major problems confronting European telecoms firms in the face of changing market structures and technological trends:

- Firstly, the technical capabilities of European telecom equipment firms are dangerously concentrated in the telecommunications side of network-based markets, with major weaknesses in integrating telecoms with computers and software;

- Secondly, the ability of European telecom equipment firms to control the content and pace of development of standards has historically been a major support mechanism for their product development strategies. This is breaking down because of the growing importance of computer and software firms to the development of standards and the concomitant decentralization of standards development.

Changing conditions in the telecom market are, however, also creating new opportunities. Maintaining the competitive position of European firms will require an aggressive innovation strategy to develop the equipment necessary to succeed in high-growth markets.

Source: European Commission, DG XIII

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