The impact of innovation support programmes on SME innovation in traditional manufacturing industries: an evaluation for seven EU regions

D. Radicic, G. Pugh, H.J.G.M. Hollanders, R.J.M. Wintjes

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Abstract

This study investigates the impact of innovation support programmes on
SME innovation in traditional manufacturing industries in seven EU
regions. Recent literature identifying sources of potential government
failure in innovation policy suggests that the effects of public support
measures to increase private innovation may be disappointing. Our
results are consistent with this hypothesis, yet also suggest a
direction for policy reform to overcome government failure and, thereby,
to increase the potential additionality of innovation support
programmes. Innovation support programmes in the EU typically adopt a
"cream skimming" selection strategy: namely, programme managers
systematically select firms on the basis of observable characteristics
conducive to innovation. The econometric analysis of a new survey
database reported in this paper suggests that "cream skimming" leads to
firms being selected for programme participation that benefit less than
would randomly selected firms. The policy corollary is that, subject to
due diligence checking, allocation of innovation support by lottery
should give rise to greater programme additionality than does the
prevalent "cream skimming" approach. We conclude with some practical
guidelines for allocation by lottery, which were developed for a
recently launched innovation support programme for SMEs.

Key words: innovation; SMEs; traditional manufacturing industry; public
innovation support; government failure; evaluation
Original languageEnglish
Place of PublicationMaastricht
PublisherUNU-MERIT
Publication statusPublished - 1 Jan 2014

Publication series

SeriesUNU-MERIT Working Papers
Number033

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