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Public funding of innovation: Exploring applications and allocations of the European SME Instrument

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  • Mina, Andrea
  • Minin, Alberto Di
  • Martelli, Irene
  • Testa, Giuseppina
  • Santoleri, Pietro

Abstract

Financial constraints can severely limit the development of small and medium size enterprises (SMEs) and are very likely to affect innovative firms. In order to lower the barriers to firm growth, in 2014 the European Commission introduced the SME Instrument with the specific aim to support businesses with high-growth potential in need of external finance. By exploiting the availability of information not only on grant awards but also on applications, this is the first study that examines which types of firms apply to the scheme and which ones are selected for the two main rounds of funding. The evidence suggests that the scheme is successful at attracting SMEs with high-growth potential, and that – in line with signalling theory – patenting and prior venture capital funding are strong predictors of awards.

Suggested Citation

  • Mina, Andrea & Minin, Alberto Di & Martelli, Irene & Testa, Giuseppina & Santoleri, Pietro, 2021. "Public funding of innovation: Exploring applications and allocations of the European SME Instrument," Research Policy, Elsevier, vol. 50(1).
    • Handle: RePEc:eee:respol:v:50:y:2021:i:1:s0048733320302067
    DOI: 10.1016/j.respol.2020.104131
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    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy

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