Research and innovation are key to building a prosperous future for the EU. They therefore figure prominently in the Europe 2020 strategy and the European Semester process and underpin progress towards the 10 priorities of the Juncker Commission, from providing a new boost to jobs, growth and investment, to developing the digital single market and developing the Energy Union. The EU has fantastic strengths. It is open, diverse, and hosts excellent institutions. With Horizon 2020, the Union funds research and innovation on an unprecedented scale. But we face three major challenges. First, we need to strongly improve our track record in getting research results to market and technologies developed in Europe are often commercialised elsewhere. Second, although Europe generates more scientific output than any other region in the world, we often fall behind on the very best science. Third, Europe punches below its weight in international science cooperation and science diplomacy. This report presents an in-depth indicator based analysis of the EU’s science, research and innovation performance and provides insight into the underpinning factors and drivers. It provides extensive evidence of the EU’s performance in relation to each of these three challenges. The Report shows, first and foremost, that the EU’s productivity gap with the US has widened following the economic and financial crisis and that this is linked to a relative underinvestment in R&D and an inability to re-orient the economy towards activities with a higher knowledge content. While the report shows that the EU continues to be one of the world’s major players in science and technology, it also shows that the EU’s economy needs to become more dynamic and innovation-intensive.