Improving access to finance for young innovative enterprises with growth potential: Evidence of impact of R&D grant schemes on firms' outputs

Abstract

Abstract Responding to the lack of in-depth research into the effects of R&D grants for scale-ups, this article examines how they impact upon firms' employment, firm economic and innovative performance, and firm innovative activities. Drawing on both policy evaluations and empirical literature relating to R&D programmes and firms' outputs, it contributes by discussing and comparing different types of R&D programmes and analyzing the wider policy implications. Overall, positive outcomes are found on employment, total sales and share of innovative sales (effects which can persist for several years), and companies' innovation capacities. Moreover, the effects for R&D grants for scale-ups are larger than the effects of both generic R&D grants and R&D subsidies. In terms of policy implications, R&D grants stimulate and prepare companies for growth and targeted funding (technology focused) delivers better results for disruptive innovations, whereas generic grants for small and medium-sized enterprises are better suited for knowledge diffusion. Despite the positive effects of milestone-based selection mechanisms and phased funding, they are still under-used. Competitive R&D grants help companies to attract follow up (especially equity) funding. When coupled with complementary services (e.g. networking, advice), there is a longer lasting effect. Lastly, tax incentives and grants are complementary as regards to their impact on firm growth and innovation activities.