Process Evaluation of Business Subsidies in Finland. A Quantitative Approach

This is an evaluation study which examines the financing process through which Finnish enterprises apply and receive business subsidies from the central government. It examines comprehensively the three entities involved when this type of state aid is distributed in Finland, namely the applicant enterprises, the projects financed and the distributors of funds. It demonstrates how quantitative methods can be used to monitor and evaluate state aid to enterprises. In the study the distributor is the Ministry of Trade and Industry (KTM). The material is gathered from data found in state aid applications by enterprises located in industrially declining areas (European Structural Funds Objective 2 areas) in the prefectures of Varsinais-Suomi and Päijät-Häme during 1995-96. The study focuses upon the characteristics of the applicant enterprises and the projects financed. It also includes performance measurements of different financing operations by the KTM. Furthermore, by building logistic regression models, it examines the factors that influence the KTM in deciding whether to finance or not a state aid application. Results indicate (a) that there are no clear differences between enterprises which receive aid and those which do not and (b) that each KTM office applies to some extent its own financing procedures. Recommendations based on this study include (1) the standardization of the selection methods of enterprises, (2) the better utilization of the databases, (3) the creation of a flexible and targeted system of state aid where final beneficiaries are clearly defined, (4) the creation of a follow-up system to measure and evaluate the impact of the state aid, (5) imposing restrictions as to how often the same enterprises can be granted aid and (6) the introduction of an alternative type of aid in the form of forgivable loans.