Federalism and innovation support for small and medium-sized enterprises: Empirical evidence in Europe

Private innovative activities receive public innovation support from different political levels. Few studies have empirically evaluated the influence of political systems on the reception of public innovation support and no other studies have evaluated innovation support across Europe with CIS data. This paper analyses the differences between federal, semi-federal and centralist political systems with CIS data from sixteen European countries. The results show that regional programmes in federal and semi-federal countries reach firms with barriers to innovate, such as small and medium-sized enterprises, while other programmes only claim to reach them. Federal and semi-federal countries therefore support a broader variety of firms compared with centralist countries. European support reaches SMEs better in centralist countries compared with federal and semi-federal countries. Regular and higher expenditure on innovative activities shows a positive influence on the reception of support in all countries, while indicators such as market focus vary between countries and political levels. Regional programmes focus more strongly on companies with a regional market focus, which can be seen as another barrier to innovation. As a policy implication, the paper implies that barriers to innovation can be reduced by a decentralized innovation framework with stronger regional programmes.