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Effectiveness and efficiency of SME innovation policy

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  • James Foreman-Peck

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Abstract

This paper assesses UK innovation policy impact on a large, population weighted, sample of both service and manufacturing SMEs. By focussing on self-reported innovation the study achieves a wider coverage of the effects of SME innovation policy than possible with more traditional indicators. Propensity score matching indicates that SMEs receiving UK state support for innovation were more likely to innovate than unsupported comparable enterprises. Innovating enterprises are shown to have grown significantly faster over the years 2002–2004 when other growth influences are appropriately controlled. Combining these two results and comparing the outlays on SME innovation policy with the estimated effects suggests that policy was efficient as well as effective. There is evidence that SME tax credits were expensive compared with earlier support instruments. But the overall high returns estimated suggest that, even in times of public spending cuts, persisting with SME innovation policy would be prudent. Copyright Springer Science+Business Media, LLC. 2013

Suggested Citation

  • James Foreman-Peck, 2013. "Effectiveness and efficiency of SME innovation policy," Small Business Economics, Springer, vol. 41(1), pages 55-70, June.
  • Handle: RePEc:kap:sbusec:v:41:y:2013:i:1:p:55-70
    DOI: 10.1007/s11187-012-9426-z
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    File URL: http://hdl.handle.net/10.1007/s11187-012-9426-z
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    More about this item

    Keywords

    Innovation; State aid; SME; Policy evaluation; L25; L26; R38;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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