The Rt Hon. Lord Willetts
Edited by Jakob Edler, Paul Cunningham, Abdullah Gök and Philip Shapira
Edited by Jakob Edler, Paul Cunningham, Abdullah Gök and Philip Shapira
Jakob Edler, Abdullah Gök, Paul Cunningham and Philip Shapira
This chapter introduces the reader to the wealth of evidence in this Handbook, and provides guidance for the interpretation of its findings. It first presents the basic definitions and delineations of innovation policy and discusses innovation policy rationales and their limitations. The chapter then reflects on the different understandings of policy instruments and on the nature of policy impact, highlighting the benefits, value and limits of impact analysis. Against this background, a typology of innovation policy instruments is presented which has been developed for this Handbook to systematise the evidence and which allows distinct entry points for readers interested in different kinds of instruments. After providing an explanation of the methodology applied throughout the Handbook, the chapter closes with reflections on how to interpret the findings of the book.
Philippe Larédo, Christian Köhler and Christian Rammer
R & D tax incentives are a policy tool to support business R & D. Their main rationale is to compensate for limited appropriability of private R & D due to knowledge spillovers. By granting a tax reduction depending on either the volume of or increase in a firm’s R & D expenditure, governments co-finance private R & D. The key direct objective of R & D tax incentives is to raise business R & D expenditure, and most evaluations undertaken have analysed the effectiveness of this instrument based on input additionality. In recent years, fiscal incentives have also been used to target other policy objectives, including the support of small and young firms, strengthening of industry–science linkages and promoting R & D in certain thematic areas. Furthermore there has been more and more attention by governments on broader impacts: the competitiveness of their industry and the international attractiveness of their country as a location for innovation. However, very few evaluations have addressed these issues, and little is yet known about the long-term welfare effects.
Paul Cunningham, Abdullah Gök and Philippe Larédo
Direct support of R & D to individual companies, particularly through grants and loans, is a cornerstone of innovation policy. While initially targeted at large firms, the focus of direct measure is now very often on SMEs, and on specific sectors or technologies or – more recently – targeted at societal challenges and to mitigate the adverse financial climate within which firms currently operate. R & D grants and loans are generally simple instruments to implement. They show a range of quantifiable input effects (e.g. increased R & D expenditure) and output effects (e.g. increased turnover with innovation based on R & D and an increased level of invention measured with patents). Evaluations also find a change towards riskier and more ambitious innovation activities supported by direct measures, especially for small and younger firms. However, evaluations struggle to determine the overall effects, especially the less tangible outcomes such as effects on behaviour, skills and capacity, and long-term spillover effects. Also, the ‘average’ success of a programme tends to be based on a small number of successful cases. The chapter finds a crowding-out effect of firm spending on R & D above a subsidisation rate of 20 per cent, and also indicates that, while firms do better with repeated support, especially when linking direct and indirect support, this risks creating a subsidy culture for a few and lack of support for many. Finally, direct support measures perform better when accompanied by a complementary set of services and further support.
Barbara Jones and Damian Grimshaw
Skills and innovation are often claimed to be the twin engines of economic growth, but there is a surprisingly limited appreciation in the literature on innovation and innovation policy of how these core features combine and interact both at the firm level and at the interface between tertiary education and industry. Because of that lack, this chapter develops a number of key analytical concepts to make the relevant links between skill formation and innovation performance. The chapter in particular reports the relative merits and challenges of two important areas of education and training policy, that is, levy schemes for enterprise training and policies for high-level skill formation. Against the background of little systematic evidence as to the link between skill formation and innovation performance, two strong key findings emerge: a positive association between innovative firms and the level of expenditures on formal and informal training compared to non-innovative firms; and that firms benefit from a significant positive effect by developing their ‘knowledge pool’. Overall, there is an apparent need for policy to support high skill-mixes as well as intermediary technical skills within firms – rather than through buy-in – through better incentives. Moreover, there is a strong need to develop improved concepts and empirical research to better understand the benefit of skills for innovation performance, not least in order to help firms to better grasp the overall benefit of skills and thus invest in them.
John Rigby and Ronnie Ramlogan
Governments throughout the developed and less developed worlds are increasingly implementing policies that promote entrepreneurship. These fall into two categories: initiatives that promote entrepreneurial values and attitudes, and initiatives that attempt to teach and develop the decision-making skills that are needed by those who might be classed as entrepreneurs or those aiming to become entrepreneurs. Policies and programmes are being developed for implementation at different levels of the educational system and also beyond the end point of formal education. Extensive private provision of entrepreneurial values and skill sets also exists, and there are links between what is done by government and by private organisations. This chapter considers the rationales for entrepreneurial policies, the forms they take, and their effectiveness.
Philip Shapira and Jan Youtie
This chapter considers the available evidence on the impact of technology and innovation advisory services. Technology and innovation advisory services are services provided directly by specialists particularly to small and medium-sized enterprises to support and stimulate improvements in business operations including productivity, efficiency, production, quality, waste reduction, information technology and logistics. The review focuses on developed economies where well-established technology and innovation advisory services are found. We provide an overview of technology and innovation advisory services, including the major types of approaches and services adopted and the rationale for public support. This is followed by a discussion of leading examples of technology advisory and innovation services in the UK and in other developed economies. The chapter then collates and examines the available literature, including formal evaluation studies, selected academic papers and accessible grey literature, to assess the evidence on impact. The reviewed studies generally find that technology and innovation advisory services provide positive benefits for participating firms. The types of benefits achieved include reductions in costs, improved quality, reduced waste and improved environmental performance, higher productivity, and new product development and innovation. Levels of investment involved (by both the public sector and private participating firms) are typically not high. Similarly, the net benefits achieved are often relatively modest for individual projects, although such incremental improvements add up and can make the difference to SME survival or decline. Lessons and insights for policymakers are highlighted.