The Hungarian capital came out top of a shortlist including Wroclaw in Poland, Jena in Germany, Sant Cugat del Valles near Barcelona in Spain, and a joint bid by Bratislava and Vienna.

The European Institute of Innovation and Technology (EIT) is an attempt to catch up with U.S. research advances and is the brainchild of European Commission President Jose Manuel Barroso.

He had envisaged a campus-based institute to rival the Massachusetts Institute of Technology in the United States.

But faced with scepticism on the part of Britain and other EU countries, the EIT will have a more modest start as a link to a network of universities and private research bodies.