The Impact of Innovation Support Programmes on SME Innovation in Traditional Manufacturing Industries: An Evaluation for Seven EU Regions

UNU-MERIT Working Paper No. 2014-033

57 Pages Posted: 22 May 2014

See all articles by Dragana Radicic

Dragana Radicic

Bournemouth University - Business School

Geoff T. Pugh

Staffordshire University Business School, UK

Hugo Hollanders

Maastricht University

René Wintjes

UNU-MERIT

Date Written: May 18, 2014

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.

Keywords: innovation, SMEs, traditional manufacturing industry, public innovation support

JEL Classification: O32, O38, C34, C14

Suggested Citation

Radicic, Dragana and Pugh, Geoff T. and Hollanders, Hugo and Wintjes, René, The Impact of Innovation Support Programmes on SME Innovation in Traditional Manufacturing Industries: An Evaluation for Seven EU Regions (May 18, 2014). UNU-MERIT Working Paper No. 2014-033. Available at SSRN: https://ssrn.com/abstract=2438459 or http://dx.doi.org/10.2139/ssrn.2438459

Dragana Radicic

Bournemouth University - Business School ( email )

Executive Business Centre, 89 Holdenhurst Road,
Bournemouth, BH8 8EB
United Kingdom

Geoff T. Pugh (Contact Author)

Staffordshire University Business School, UK ( email )

Leek Road
Stoke-on-Trent, ST4 2DF
United Kingdom
01782 204092 (Phone)

HOME PAGE: http://www.staffs.ac.uk/staff/profiles/gtp1.jsp

Hugo Hollanders

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

René Wintjes

UNU-MERIT ( email )

Netherlands

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