How well are European firms responding to the new opportunities for growth, and in which global value chains are they developing these new activities? The policy discussion on the future of manufacturing requires an understanding of the changing role of manufacturing in Europe's growth agenda.

In its May 2005 the Group of Economic Policy Analysis (GEPA) discussed the issue of EU competitiveness and industrial location. At that meeting, a request was made for BEPA (Bureau of European Policy Advisors) to prepare a report (i) taking stock of the phenomena of delocalisation and outsourcing in particular and globalisation in general (ii) assessing their impact on the European economy and (iii) considering how potential challenges can be addressed. This report a draft of which was presented to the GEPA in September 2005 - is a response to this request. The report discusses EU trade patterns, reviews factors affecting industrial location decisions, reviews relevant evidence on globalisation and relocation and their impact in particular on employment and presents a set of policies aimed at improving the EU's competitiveness and its ability to address challenges emanating from these shocks. Notwithstanding the problems of accurately defining and measuring the phenomena, data so far suggest that delocalisation and outsourcing appear to be limited in scope. However, from this low base it is growing in significance, and more forward-looking firms intend to use it extensively

Industrial policy has for a long time raised difficult questions for policymakers to unpick. What justifications are there for government intervention in market mechanisms, and how and to what extent should governments intervene? What are the pros and cons of picking 'winners' for support? These questions have made a powerful return in the wake of the COVID-19 pandemic and geopolitical uncertainty, and because of the pressing need to move to net-zero emission economies. In addition, the European Union is reviving its industrial policy in the context of support given to companies in the United States under the US Inflation Reduction Act. This volume, produced with financial support from the European Climate Foundation, assesses what must be done to implement industrial policy in a way that will achieve overarching goals while minimising distortions.

This study investigates the effects of an R&D subsidy scheme on participating firms' net R&D investment. Making use of a specific policy design in Belgium that explicitly distinguishes between research and development grants, we estimate direct and cross-scheme effects on research versus development intensities in recipients firms. We find positive direct effects from research (development) subsidies on net research (development) spending. This direct effect is larger for research grants than for development grants. We also find cross-scheme effects that may arise due to complementarity between research and development activities. Finally, we find that the magnitude of the treatment effects depends on firm size and age and that there is a minimum effective grant size, especially for research projects. The results support the view that public subsidies induce higher additional investment particularly in research where market failures are larger, even when the subsidies are targeting development.