Studying the impact of R&D tax incentives on SME-led innovation

The University of Maastricht Campus in Brussels

(Tervurenlaan 153, 1150 St-Pieters-Woluwe)
Wednesday 25th September 2019

Supported by the European Commission’s Executive Agency for SMEs (EASME) with Horizon2020 funding from the INNOSUP Programme, WATSON has studied the impact of R&D tax credits and incentives on SME-led innovation within Europe, bringing together leading European research institutions and Innovative SMEs from the domains of Fintech, financial services and economics. R&D tax credit schemes have been widely implemented as a measure of innovation funding but the “one size fits all” nature of R&D tax incentive schemes do not account for intrinsic differences in the research and results of different industries, leaving certain sectors at a disadvantage in achieving funding and limiting the impact of R&D tax schemes. WATSON has looked at furthering knowledge of innovation funding through detailed study of SME funding and identifying gaps in European tax credit schemes. This will enable improved funding measures to expand innovation support for SMEs through the provision of instruments better targeted to the needs of specific SME segments.

This event presents the methodology, findings and recommendations of the WATSON project, along with fellow INNOSUP 2017 projects Oasis and SMEthod which also examine segmentation and support measures for innovating SMEs.


09:30 – 10:00 Registration and Welcome Coffee

10:00 – 10:15 Welcome/INNOSUP supporting SME innovation – Daniel Gassmann, Head of Sector, EASME

As a senior representative of EASME, Daniel will set the context for the event and the research to be presented by the WATSON, OaSiS and SMEthod projects. Daniel will introduce EASME, the aims of the Horizon 2020 INNOSUP call, and outline the European Commission’s reasons for providing funding in this area.

10:15 – 12:00 Presentation of findings of H2020 INNOSUP project, WATSON

10.15 WATSON Project Overview – Stephen Bourner, Kapitalise (Project Co-ordinator)
WATSON consists of 6 organisations led by the SME Kapitalise Ltd (UK) and comprised of industrial partners, Exodus S.A. (Greece), Inventya Ventures (EU) Ltd (Ireland), and academic institutions, Imperial College London (UK), Maastricht University (Netherlands) and London School of Economics (UK). These partners have co-operated across different work packages (WPs) to further the knowledge of innovation funding by developing a framework methodology for: a detailed study of SME segmentation (WP2); an examination of the impact of R&D tax credit incentive schemes (WP3); and an investigation of innovation impact indicators (WP4). These studies and their associated data are integrated into the WATSON ICT innovation analytics platform (WP5).

10.25 SME Market Segmentation – Presentation by Valerie de Leonibus, Inventya

Inventya have sought to identify the main indicators for innovative SMEs segmentation, and to develop a comprehensive database and dataset of variables around SME innovation to support a new segmentation. An SME market segmentation methodology has been developed using existing data (reviewing and defining existing segmentation methods of SME innovation, identifying their shortcomings and gaps) along with a newly generated dataset gathered from a primary survey. Bespoke data has been gathered that can be used to develop a realistic segmentation of innovating SMEs including new parameters such as the smart specialisation priorities of regions. This is key to determining the innovation and support needs of these SMEs.

10.50 R&D Tax Credit & Incentive Schemes – Presentation by Paola De Pascali, Kapitalise

Kapitalise has led an examination of the effects of Research & Development tax relief on SMEs in a selection of EU states from the perspective of integral stakeholders, government agencies and SMEs. Research has focused on organisations with a key role in either providing support for R&D grants and/or delivering R&D tax credit schemes, and representative bodies for small businesses giving a voice to SMEs in the respective member’s states. Findings and policy recommendations will be presented through an overview of main results of two empirical studies showing barriers to innovation and the main expectations of participants for future R&D policies in Europe.

11.15 Innovation Impact Indicators – Presentation by Ralf Martin, Imperial College

Imperial College, working with LSE and Maastricht University, address the question ‘What strategy should governments pursue when designing a strategy for Industrial and R&D policy?’ The strategy should be built around clearly identified and measured market failures. A key market failure is knowledge spillovers which imply that innovating firms do not invest enough in R&D because the social returns are higher than the private ones. Hence, governments can increase productivity by targeting sectors, technology areas or firms generating higher social returns. A new indicator, ISTRAX, has been developed, based on global patent and stock market data, accounting for both direct and indirect spillovers. The methodology takes account of variations in the value of innovations between different technology fields. ISTRAX is computed for various key countries at the level of detailed technology areas. This provides a suggestive ranking of areas for governments to focus on.

11.40 WATSON ICT Platform – Presentation by Anna Palaiologk, Exodus
Exodus have integrated the WATSON studies and their associated data into the WATSON ICT innovation analytics platform. This online tool has been developed by Exodus to facilitate data retrieval and analysis. From a policy point of view, this tool can be used to analyse and identify gaps and opportunities in the funding of European tax credit schemes and help better target and improve innovation funding measures. This will also allow exploration of which particular segments to support. As well as policymakers, the platform can also be used by different stakeholders, utilising an adaptive bespoke operating interface, as a decision-making tool, e.g. to identify the best places to invest, etc.

12:00 – 14:00 Lunch Break/Networking

14.00 – 15.10 Presentations of other H2020 INNOSUP 2017 projects, OaSiS and SMEthod

14:00 OaSIS project – Presentation by Antoni Pastor, EURADA (European Association of Development Agencies)

OaSiS (Optimising Support for Innovating SMEs) is developing a performance-based methodology for regional development and innovation agencies to segment & support innovating SMEs. It aims to provide thorough analyses of existing approaches to the segmentation of Innovating SMEs and an assessment of the effectiveness of regional support mechanisms currently used in Europe. Unique Big Data analyses will uncover patterns and correlations among innovating SMEs and spot (early) “success metrics”. This allows the development of new, optimised funding schemes and targeting of enterprises with the highest growth potential.

14:35 SMEthod project – Presentation by Pawel Nowakowski, Market Research & Analysis Centre and Wrocław University

SMEthod aims to help Europe select SMEs that have the highest innovation potential and also to choose which types of support to give them. This seven-partner project investigates the factors that impact SME performance and the types of support that are most effective. Project outputs will help European support agencies to better harness the power of SMEs by funding their innovation capacities in a more efficient and socially desirable way. The ultimate objective is the implementation of a decision support tool based on the SMEthod methodology.

15:10 – 15:50 Discussion Panel: What is innovation? The search for a consistent definition
(Facilitated by Sarah Malter, CEO, Kapitalise)
Representatives from WATSON, OaSIS, SMEthod and EASME will discuss what is meant by ‘innovation’ and examine attempts to come up with a consistent and meaningful definition.

15:50 – 16:00 Event close