The proposal by the European Commission to compete with American rivals like the Massachusetts Institute of Technology (MIT) have already been criticised by Lord Patten, the former European commissioner, who is now chancellor of Oxford.

The proposed EIT, which the commission hopes to start operation in 2009, would draw together research teams in universities and also have business involvement. It would consist of a governing board with a small supporting administration and a set of "knowledge communities", distributed all over Europe, carrying out the activities in strategic trans-disciplinary areas. The commission see it as a way of bringing in private investment and linking universities and businesses.

Launching the plan, José Manuel Barroso, the president of the European Commission, said: "Excellence needs flagships - that's why Europe must have a strong European Institute of Technology, bringing together the best brains and companies and disseminating the results throughout Europe."

He added: "The EIT will be a light and flexible organisation. It will teach graduates and doctoral candidates, carry out research and be active in innovation, both in some strategic thematic areas and in the field of science and innovation management."

But Drummond Bone, the president of Universities UK, which represents British university heads, said an EIT was not the right vehicle for this objective to promote the growth of research. "If these plans go ahead, they will threaten the EU's goals of boosting research and development efforts, by distracting resources and efforts away from existing proposals to back high-level research through a European Research Council (ERC) and through the framework programme.

Prof Bone added: "The current EIT proposals do not take into account the realities of cross-border research and interaction with business. Looking across the Atlantic to MIT and trying to engineer it in Europe, which in effect is what the commission has done, is simplistic in the extreme. Unless we see changes to these plans, European research could be lumbered with a costly white elephant."

The commission said the EIT would set out to attract the best and most talented students, researchers and staff worldwide. "These will work side by side with leading businesses in the development and exploitation of cutting-edge knowledge and research, thereby enhancing research and innovation management skills generally.

"The integration of teams from universities, research centres and companies will give it an edge over traditionally organised universities or networks. Furthermore, the new EIT model will act as a catalyst for reform by inspiring change in existing institutions."

The commission set out the case for an EIT in a memo.

A commission statement said the EU needed to concentrate its human, financial and physical resources in research and higher education. "This does not mean creating a new university on a single site, but a new, multi-site, legal entity, which brings together the best teams and university departments in strategic fields across Europe. This responds to the need to promote an innovation and entrepreneurial culture in research and education as well as new organisational models that are suited to today's needs. The EIT will thus perform a role unlike any existing or planned EU initiative or national university.

"There are numerous incentives for partner organisations to have their best teams participate in the EIT while remaining on-site: visibility which will attract top-class students, researchers and staff; privileged links with knowledge spill-overs; financial incentives, a dynamic for change and local spin-offs," it concludes.

If the plan goes ahead a governing board could be appointed in early 2009, along with the first staff, while the identification of the knowledge communities should start in the same year.