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

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