José Manuel Barroso, president of the European Commission (EC), delivered a tough message to his constituents last month: Europe’s universities – even its Oxfords and Sorbonnes – lack the critical mass required to compete with leading universities in the United States. To accelerate the region’s innovation engine, Barroso proposed a European university with true star power, dubbed the European Institute of Technology (EIT).

When the European Union heads of state meet later this month in Brussels they will consider this controversial proposal to shake up Europe’s universities. The idea of an EIT first appeared on the EC’s agenda in February 2005, when Barroso floated it as one solution to a perceived “innovation gap” between Europe and the United States. As proof, he noted that Europe’s share of global patents and Nobel Prize winners was dropping. Worse still, claimed the EC, Europe was less effective at translating its shrinking number of innovations into commercial results.

The EC pins much of the blame on Europe’s universities. It argues that the EU’s system for research and higher education is just too fragmented. According to the commission, nearly 2,000 universities in the region aspire to be active in research. Compounding the problem, they say, is relatively weak spending on education and R&D in Europe, compared with the United States.

To solve the problem, the EIT would recruit Europe’s best scientists to form interdisciplinary research and teaching networks around issues or themes, such as wind power, avian influenza, and sustainable transportation. Perhaps more important, though, would be the forging of closer ties with businesses, both to access private funding and to accelerate commercialization of its advances.

The EIT proposal has received mixed reviews, though. A few governments have already offered their support. France has promised 300 million euros – if the EIT’s headquarters are established in Paris – while others, notably, the United Kingdom, advocate strengthening existing universities instead.

Universities are similarly divided. The proposal has led to an uproar from the European Universities Association in Brussels, which fears that the EIT would further dilute EU research budgets. Some universities, however, welcome the EIT, as an endorsement of their own efforts to put technology transfer on an equal footing with research and teaching.

A survey of U.K. and U.S. innovation released last month by the Cambridge-MIT Institute suggests that EC president Barroso may have oversimplified Europe’s dilemma, however. Alan Hughes, Director of the University of Cambridge’s Centre for Business Research, says it may be the ability of European businesses to integrate innovative research that needs more attention.

The Cambridge-MIT Institute’s International Innovation Benchmarking project found that a high level of partnering already exists between businesses and universities in the United Kingdom. The survey, which contacted 3,600 U.S.- and U.K.-based companies, found that U.K. businesses were 30 percent more likely to cite joint R&D with universities as an activity that contributes to their innovation; and the U.K. companies were roughly three times more likely to cite the licensing of university-held patents.

However, the survey revealed that U.S. companies that collaborate with universities seem to get more out of the partnership than their U.K. counterparts. U.S. companies were more likely to say they valued the partnerships, and so they gave them a larger share of their innovation budget.

Hughes says creating an EIT may not address this “thinness” of the U.K. partnerships relative to those in the United States – because the problem may lie on the business side. “It probably reflects the extent to which the companies themselves are capable of absorbing what the innovators have to offer,” Hughes says. “In the U.S. you have more highly qualified management teams and labor staffs.”

Even more important, though, says Hughes, is that both U.S. and U.K. businesses value universities more for their graduates and publications, and for the informal contacts they foster between researchers, than for explicit R&D partnerships and licensing agreements. Hughes thinks national institutions are more likely than an EIT to foster these more informal exchanges businesses value most. “I’m not confident you can do these sorts of things in a top-down way,” he says.

Such discussions about the merits of a European-wide technology institute for fostering innovation may turn out to be, well, academic, at least in the short term. Given the well-publicized defeat of a proposed EU constitution last year, some of Europe’s national leaders may question whether the timing is right for pursuing another grand European institution. If they do, though, EIT-based research would not begin until 2010 at the earliest.