Support where it works

Inventors, entrepreneurs and start-ups offer a glimmer of hope in a time of low growth and austerity, with governments and economists alike shifting their attention towards innovation as a way out of a protracted crisis. Government-supported policies and programmes to support business innovation have been around for decades, but how successful are they and what lessons can be drawn for these more austere times?

Business Innovation Policies: Selected Country Comparisons looks at innovation policies across seven OECD countries, highlighting the trends in support measures. It also considers the growing shift towards so-called “demand-side” policies, aimed at increasing demand for innovation among enterprises. For instance, R&D tax credits are more generous now than they have ever been, and are currently provided in 22 OECD countries, up from 12 in 1995. Individual grants to entrepreneurs and inventors are also an important part of innovation policy; the Foundation for Finnish Inventions, for instance, financially supports the development and commercialisation of invention proposals, with awards typically ranging from US$2,800 to $280,000.

Successful non-R&D innovation policies include Denmark’s Vækstfonden, which has used US$12 billion in public funds to support over 3,500 companies since 1992, and the UK’s Knowledge Transfer Partnership, which encourages collaboration between businesses and universities through projects which receive government funding. The average project cost is around $93,000 a year, but results in an increase in annual profit of $357,000 for participating firms (of which there are typically over 1,000 at any given time). The report notes that some schemes require improvements, such as the Pre-Seed Fund in Australia, which encourages private sector investment in research institutions. The fund caps grants at US$780,000, which in certain cases leaves firms “stranded”, lacking funds to continue with a project once they have already made large investments.

Investment in innovation does not come cheap, but it pays off, not only in the short term, but by opening up the business world to new technologies and job-creating growth.

OECD (2011), Business Innovation Policies: Selected Country Comparisons, Paris.

OECD Directorate for Science, Technology and Industry.

Denmark’s Vækstfonden.

UK’s Knowledge Transfer Partnership.