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Companies' growth in the EU: What is research and innovation policy's role?

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Abstract

One of the main objectives of the new European research and innovation policy agenda is to favour the positive demographics (creation and growth) of EU companies operating in new/knowledge-intensive industries, especially Small and Medium Enterprises (SMEs). These companies play an important role in shaping the dynamism of the economy’s sectoral composition, favouring the transition towards more knowledge-intensive activities (smart growth) and in contributing to the overall economic growth objectives and more and better jobs. But which kind of companies should be helped by policy? And how? This paper presents a literature review on the economics of research, innovation and competitiveness, focusing on the evidence available regarding the determinants for new and existing company creation and growth and the role played by Research, Development (R&D) and innovation. Furthermore, based on this, it draws a number of policy implications to design future research and innovation support instruments targeting innovative company growth in Europe. The result of this work indicates that: a) EU needs support policies to foster R&D investment in some specific typology of innovative companies and only where there are market failures and clear high social returns; b) the establishment of any targeted support instruments should take into account an integrated set of criteria including: firms' age and size, the sectors where firms operate, the involved risks in and potential for their innovative and commercial activities, the country/techno-economic environment, and the degree of internationalisation; c) to be successful, no matter the new targeted policies and supporting instruments, they should be designed using policy experimentation and its results should be regularly measured and evaluated using appropriate indicators and analyses.

Suggested Citation

  • Pietro Moncada-Paterno-Castello, 2011. "Companies' growth in the EU: What is research and innovation policy's role?," JRC Working Papers on Corporate R&D and Innovation 2011-03, Joint Research Centre (Seville site).
  • Handle: RePEc:ipt:wpaper:201103
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    File URL: http://iri.jrc.ec.europa.eu/documents/10180/25218e3e-d7cf-4818-b1dd-bc932a29bcbf
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    1. Rachel Griffith & Stephen Redding & John Van Reenen, 2004. "Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 883-895, November.
    2. Pietro Moncada-Paternò-Castello & Marco Vivarelli & Peter Voigt, 2011. "Drivers and impacts in the globalization of corporate R&D: an introduction based on the European experience," Industrial and Corporate Change, Oxford University Press, vol. 20(2), pages 585-603, April.
    3. Isabel Grilo & Roy Thurik, 2008. "Determinants of entrepreneurial engagement levels in Europe and the US," Industrial and Corporate Change, Oxford University Press, vol. 17(6), pages 1113-1145, December.
    4. Moncada-Paternò-Castello, Pietro & Ciupagea, Constantin & Smith, Keith & Tübke, Alexander & Tubbs, Mike, 2010. "Does Europe perform too little corporate R&D? A comparison of EU and non-EU corporate R&D performance," Research Policy, Elsevier, vol. 39(4), pages 523-536, May.
    5. Raquel Ortega-Argilés & Marco Vivarelli & Peter Voigt, 2009. "R&D in SMEs: a paradox?," Small Business Economics, Springer, vol. 33(1), pages 3-11, June.
    6. Erik Stam & Karl Wennberg, 2009. "The roles of R&D in new firm growth," Small Business Economics, Springer, vol. 33(1), pages 77-89, June.
    7. Alex Coad & Werner Hölzl, 2012. "Firm Growth: Empirical Analysis," Chapters,in: Handbook on the Economics and Theory of the Firm, chapter 24 Edward Elgar Publishing.
    8. John C. Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," NBER Working Papers 16300, National Bureau of Economic Research, Inc.
    9. Meza, Sergio & Tombak, Mihkel, 2009. "Endogenous location leadership," International Journal of Industrial Organization, Elsevier, vol. 27(6), pages 687-707, November.
    10. George Symeonidis, 1996. "Innovation, Firm Size and Market Structure: Schumpeterian Hypotheses and Some New Themes," OECD Economics Department Working Papers 161, OECD Publishing.
    11. Breschi, Stefano & Malerba, Franco & Orsenigo, Luigi, 2000. "Technological Regimes and Schumpeterian Patterns of Innovation," Economic Journal, Royal Economic Society, vol. 110(463), pages 388-410, April.
    12. Beck, Thorsten & Demirguc-Kunt, Asli, 2006. "Small and medium-size enterprises: Access to finance as a growth constraint," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2931-2943, November.
    13. Reinhilde Veugelers & Michele Cincera, 2010. "Young leading innovators and EUs R&D intensity gap," Policy Contributions 437, Bruegel.
    14. Raquel Ortega-Argilés & Lesley Potters & Peter Voigt, 2009. "R&D-intensive SMEs in Europe: What do we know about them?," JRC Working Papers on Corporate R&D and Innovation 2009-15, Joint Research Centre (Seville site).
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    Cited by:

    1. Gabriele Pellegrino & Mariacristina Piva, 2014. "Do innovative inputs lead to different innovative outputs in mature and young firms?," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1497, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

    More about this item

    Keywords

    Firm demographics and growth; Small and Medium Enterprises; economic dynamics; corporate research and innovation; EU competitiveness; EU policy.;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • 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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