Among the many types of policy interventions that governments implement to support innovation in small and medium-sized enterprises (SMEs), one of the most widespread is the provision of public subsidies for the purchase of knowledge-intensive services – usually in the form of subsidies or innovation vouchers.
Once SMEs have received an innovation voucher, they are expected to identify the specialist knowledge-intensive services they need, as well as the suppliers best suited to provide them. However, one of the main problems for SME is not just the lack of financial resources to invest in innovation, but also the ability to identify the knowledge they need in order to innovate, or the suppliers most appropriate to provide it. Although subsidies for the purchase of knowledge-intensive services may alleviate the financial constraints that hamper SME investment in innovation, they do not improve SMEs’ limited awareness of their own knowledge needs and of how to address them.
It has been argued that policymakers should experiment with appropriate mixes of policy instruments to support innovation in SMEs, combining financial and non-financial incentives. In our study, recently published in Research Policy, we focused on the empirical analysis of a particularly interesting mix that bundles innovation vouchers (which provide financial support) with technology and innovation advisory services (aimed at helping SMEs to become aware of their knowledge needs, and to find ways to address them). The purpose of our study was to assess whether the policy mix was more effective than either policy instrument taken in isolation, in order to improve companies’ innovation performance. We considered several measures of performance: innovation of products, processes, or strategies; improved ability to design R&D projects; improved ability to identify innovation partners; improved awareness of own technological needs; improved awareness of own human capital needs; increased number of employees; increased productivity (added value per employee); increased total revenue.
We relied on data from companies involved in two innovation policy programmes implemented in the Italian region of Tuscany. The first involved the provision to SMEs of innovation vouchers to buy knowledge-intensive services from accredited providers. The second consisted in the establishment of public innovation intermediaries tasked with providing SMEs with technology and innovation advisory services. These two programmes had been specifically designed so that companies could apply to either programme individually, or to both programmes at the same time. To draw causal inferences, we adopted a propensity-score-matching approach extended to the case of multiple treatments.
Overall, our results do not suggest that the mix is superior to single instruments across the board. Indeed, the policy mix was found to perform better than vouchers alone, but not better than advisory services alone, in order to raise SME propensity to innovate and engage in R&D collaborations.
The policy mix was found to be superior to both advisory services and vouchers only in relation to value added per employee in the second year following the end of the policy. Indeed, by that time, labour productivity was found to be significantly higher under the policy mix than under the other two treatment levels. This is, in our view, no minor achievement: the combination of advisory services and vouchers can be useful for the complex objective to promote reorganisation processes in SMEs, and ultimately improve their productivity.
When we considered the subsample of SMEs that were not performing R&D before they participated in the policy programmes, the analysis offered additional insights. In particular, we found that for these firms the policy mix was superior to both advisory services and vouchers in relation to the improved capability to design R&D projects. Additionally, the policy mix was more effective than advisory services—but not necessarily than vouchers—in increasing the probability of R&D non-performers beginning to invest in internal R&D activities. This means that for these firms, beginning to engage in internal R&D activities would have required the purchase of external skills through vouchers.
The superiority of advisory services to vouchers in raising SME propensity to innovate and to engage in R&D collaborations suggests that the main problem for such firms is not their lack of funds to acquire specialised services in the market. Rather, SMEs struggle to understand what kind of services they need, how best to use them, and where to best source them. On the other hand, in line with previous studies, vouchers do not seem able to stimulate networking.
The implication of these findings is that those policymakers who intend to support innovation in SMEs should prioritise the provision of technology and innovation advisory services through appropriate intermediaries. Additionally, vouchers facilitating access to external services could be profitably bundled with advisory services in order to help SMEs translate new innovation strategies into practice and to derive productivity gains.
The full results of our study are presented in the following article:
A. Caloffi, M. Freo, S. Ghinoi, M. Mariani and F. Rossi (2022) Assessing the effects of a deliberate policy mix: the case of technology and innovation advisory services and innovation vouchers, Research Policy.