SMEs need Government cash to innovate, study

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Companies with formal R&D structures more likely to secure funding

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22 October 2012 | 0

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Companies need Government backing to innovate if they are to develop new products and help Ireland’s economy recover.

That is the verdict of Prof Stephen Roper’s extensive study, which found that firms who received money from the Government saw sales of innovative products increase by 5%.

The Warwick Business School professor presented his findings after looking at 3,000 manufacturing Irish companies over 20 years to an Economic and Social Research Institute conference in Dublin.

Ireland was plunged into recession by the financial crisis in 2008 and is still struggling to pull itself out as the Government slashes public spending to bring its debt under control.

The ESRI conference, entitled Innovation, Productivity and Public Policy, is looking at how the Government can encourage companies to innovate and so drive the Irish economy back to life.

Prof Roper’s presentation – Does Additionality Persist? A Panel Data Investigation of the Legacy Effects of Public Support for Innovation – also found there was a ‘legacy effect’ from those companies receiving backing from Governments, so they continue to innovate better in the long term.

"Companies are receiving public support in period one, that’s enabling them to innovate so that they have a better product portfolio," Prof Roper said. "When they come to innovate in the next period, they are innovating off the back of that better product portfolio."

The Professor of Enterprise and Director of the Centre for SMEs at Warwick Business School, said there is evidence that companies receiving public money to produce new products had a better understanding of how to turn that into good sales figures.

He also found that most of the Government’s funding of innovation went to firms with established research and development departments.

"It seems as if policymakers in Enterprise Ireland and IDA like giving money to companies that have R&D departments. There might be some reason for that, like transparency. If you’re giving money to a company where they don’t have a formal R&D structure, the money can just disappear into the business."

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