EU R&D Funding as a Way of Incentivizing Innovation of SMEs: A Review of Impacts

The Innovation Union flagship initiative, with its accompanying policies and actions, strives to ensure stronger involvement of SMEs in EU R&I programs. The main idea behind this paper is to review and discuss the impacts of SMEs’ participation in EU R&D programs as a way of boosting their innovation activities. The paper addresses several research questions that help us to present the effects of increased availability of EU R&D funding on boosting innovation activities of SMEs across EU. We start by examining the current innovation performance of EU SMEs based on selected descriptive statistics and indicators. After that, we turn to elaborating the empirical and theoretical foundations and rationale for increased public funding through the EU R&D programs targeting SMEs. Then we discuss the impact of FP7, CIP, Eurostars, and Horizon 2020 funding on SME recipients. We briefly survey the results of available empirical studies that use both quantitative and qualitative evidence, and examine their outcomes in terms of direct and indirect impacts on innovation activities in EU member state SMEs. The examined empirical evidence points to several positive effects of participating in EU R&D programs on incentivizing innovation activities, output, and performance of recipient SMEs.