December 2011

Funding Innovation in the EU and

Beyond
under a Specific Contract for the Integration of the INNO Policy
TrendChart with ERAWATCH (2011-2012)
Funding Innovation in the EU and Beyond

Analytical Report 2011 under a Specific Contract for the Integration of

the INNO Policy TrendChart with ERAWATCH (2011-2012)

technopolis |group|, December 2011

This report was prepared by Kincso Izsak and Michael Kilcommons. Paresa
Markianidou provided support for the analysis of the policy measure database.
This report is based on the work of the TrendChart country correspondent
network to which recognition is due.
Table of Contents
Preface 2

Executive Summary 3

1. Objectives and Methodological Approach 5

2. Trends in Funding the Innovation Policy Mix 6

2.1 Trends in EU Member States 6

2.2 Trends beyond EU Countries 15

2.3 Government Departments/Innovation Agencies and Budgets allocated for
Innovation 17

3. Trends in selected Country Groups and Countries 20

3.1 Innovation Leaders: The Cases of Germany and Finland 21

3.2 Innovation Followers: The Cases of the UK, France and Ireland 23

3.3 Moderate Innovators: The Cases of Poland, Spain and the Czech Republic 28

3.4 Modest Innovators: The Cases of Bulgaria and Latvia 32

3.5 Non-EU Countries: The Case of the USA 34

Appendix A Estimated 2010 budgets for selected countries by main categories of
research and innovation measures (millions, euro) 36

Appendix B Budget of innovation agencies in the EU and beyond 39

Appendix C Methodological remarks 42


Funding Innovation in the EU and Beyond i

Preface
The European TrendChart on Innovation is the longest running policy benchmarking
tool at European level. Since its launch in 1999, it has produced annual reports on
national innovation policy and governance, created a comprehensive database of
national innovation policy measures and organised a series of policy benchmarking
workshops. It currently tracks innovation policy developments in 48 countries. These
are all 27 European Union Member States, plus Norway, Iceland, Israel, Switzerland,
Croatia, Turkey, Albania, Bosnia, FYROM, Montenegro, Serbia, the Faroe Islands,
Moldavia, Liechtenstein, the USA, Japan, South Korea, Russia, China, India and
Brazil.
Changes proposed by the European Commission included the merging of the INNO
Policy TrendChart and the ERAWATCH databases and thus, a joint inventory of the
full range of research and innovation policy measures has been created. To this end,
the European Commission’s DG Enterprise and Industry commissioned a contract
with the objective of providing an enhanced overview of innovation and research
policy measures in Europe and of integrating the INNO Policy TrendChart with the
complementary ERAWATCH platform. This contract is managed by the ERAWATCH
Network Asbl (http://www.erawatch-network.com) and coordinated by the
Technopolis Group (http://www.technopolis-group.com).
In each of the two years of this contract, three reports will be produced: a trend report
on innovation policy in the EU; an overview report on innovation funding in the EU;
and an analytical thematic report. Due to the on-going technical upgrading of the
database of research and innovation policy measures, in 2011, the three reports have
drawn essentially on the set of “mini” country reports produced by the
TrendChart/ERAWATCH network of experts.

Disclaimer:
The content and views expressed in this report do not necessarily reflect the opinions
or policies of the Member States or the European Commission.
Due to technical problems in the Integrated Information Management System of
TrendChart/ERAWATCH, the database of policy support measures could not be fully
extracted and the policy measures have not been analysed to the same extent as in
2009.

2
Executive Summary
Today, the most obvious and greatest challenge for research and innovation policies
across all the countries is to maintain funding levels in the face of the worst global
crisis since the Great Depression coupled with its consequences in terms of public
austerity measures and the extraordinary turmoil on the financial markets.
This report analyses the mix of public funding for innovation policy in 48 countries
including the EU Member States and competitor and emerging economies. It provides
insights into the trends in annualised spending on national innovation support
measures and the shifts in funding patterns between 2008, as reported in the 2009
TrendChart European Innovation Policy Report, and 2011.
Different countries responded differently to the crisis. In some, mainly innovation
Innovation seen to
leaders and followers1, such as Sweden, Denmark, Finland, Germany and Austria,
be a way out of the
funding for research and innovation has been increased. In other countries such as
dramatic
Portugal, the Netherlands and the UK, even if with some constraints, it has however
downturn
remained balanced. In both instances this is because policy-makers see innovation as
being one way to respond to the dramatic downturns in GDP and to the increase in
unemployment. This reflects the fact that innovation is becoming more rooted in
policy thinking. In a number of countries such as the Czech Republic, Slovakia,
Slovenia, Poland and Estonia, where the Structural Funds are largely the determining
source for R&D and innovation, there has also not been much change in funding levels
between 2009 and mid 2011.
However, there are EU Member States where decreases occurred due to the Constraints in
exceptional economic downturn and related public austerity measures. Latvia, maintaining
Bulgaria and Romania responded with unprecedented cuts and funding was also research and
reduced in Belgium and in Spain. In Italy, the economic crisis put on hold the large innovation
publicly-funded programmes, with the exception of projects co-funded by the funding levels
Structural Funds. In Hungary, there was a disruption in funding, as in 2010,
approximately 37% of the Research and Technological Innovation Fund budget was
frozen.
In a number of countries, funding provided to innovation agencies and departments
has been maintained whilst in others, institutional budgets have been cut.
Reallocations and consolidations between different government departments or
agencies can also be observed.
It is interesting to note that innovation funding in BRICs (Brazil, Russia, India and Outside the EU,
China) countries has generally been strengthened. China continues to promote innovation
science, technology and innovation activities, and R&D expenditure rose by 23% funding has
compared with 2009. In the USA, a reduction of policy budgets can be observed, generally been
except for R&D funding, which remained stable. In the EFTA countries, innovation strengthened
maintained its priority in budgetary terms. In other EU associated countries, such as
Albania, Bosnia, Croatia, Montenegro, Turkey, Serbia and FYROM, total R&D and
innovation funding is far below that of the EU average and awareness-raising about
the importance of innovation activities is still a challenge.
A trend of consolidation or concentration of funding to increase effectiveness and
impact can be observed in several countries such as Austria, Denmark, Finland, Quest for more
Sweden and the Czech Republic. Efforts are being made to streamline policy support effectiveness,
channels and to simplify the national innovation systems, which results in smaller efficiency and
consolidation of
funding
1 European Innovation Scoreboard http://ec.europa.eu/enterprise/policies/innovation/facts-figures-
analysis/innovation-scoreboard/index_en.htm

Funding Innovation in the EU and Beyond 3

 initiatives being bundled into programmes with larger budgets. A recurring theme in
the funding of innovation policy is the search for increased effectiveness and impact of
the measures. For instance, one clear impact of the deep crisis in Ireland is a strong
focus on ensuring the effectiveness of investments, particularly in high-expenditure
areas such as basic research in biotechnology and ICT.

Shift towards the There is a notable shift in several countries including the UK, Ireland, Denmark, and
application of tax France towards the application of tax credit schemes rather than the provision of
credit schemes grants. A stronger use of reimbursable loans instead of grants has appeared in, for
example, Belgium and the Netherlands and this is reflected in the new policy measures
launched during the course of 2010-2011. The Austrian research, development and
innovation strategy also puts more emphasis on guarantees, liabilities and credit-
based instruments.
In terms of priorities, no major changes can be seen in the five main research and
innovation funding groups, compared to the situation in 2009. Most of the EU
Member States allocated the majority of funding firstly, to “support measures within
research and technologies”, secondly to “promoting and sustaining the creation and
growth of innovative enterprises”, and thirdly to “human resources”.
Recent trends reflect an increasing emphasis on the commercialisation of research
Start-up funds and results and getting ideas to market. Along with this commercialisation focus, finance
support schemes for innovation is a priority across the countries, particularly when it is used to support
for young young innovative companies. Several new start-up funds and support schemes were
innovative launched in 2010-2011 including: the Start-up Estonia scheme; the Brussels Capital
enterprises Young Innovative Companies’ Scheme; National Seed Fund in France; Support for the
promotion and the development of New Innovative Enterprises in Italy; the
Innovation Fund Ireland; the Dutch Valorisation Programme; the Equity Finance line
for SMEs in Slovenia; and the Business Angel Fund in Lithuania. New measures
related to societal challenges and green innovation have been introduced and funding
has been allocated to new research programmes, particularly in the areas of
environment, health and energy in, for example, Finland, Belgium, Denmark,
Lithuania, Latvia and Poland.

Need to trigger a In France, the UK and Ireland, public-private partnerships are becoming more
leverage effect for significant, particularly in the mobilisation of risk and venture financing and growth
private capital. It is now more important than ever for public budgets to trigger a leveraging
investments effect for private investments in research and innovation. Also countries should
introduce incentives to keep the research, development and innovation activities of
multinationals in place and to attract new R&D units of large companies.
The dependence of national research and innovation policy budgets on the Structural
Funds has meant that in certain countries, there is stability in funding but this also
represents an issue when thinking about what will happen after 2013, which is the end
of the current programming period. On the basis of the Operational Programmes that
are negotiated between the European Commission and the Member States, the
Structural Funds represent long-term contracts. So policy flexibility is not so easy, as
these countries try to shape their activities based on their annual budgets. A future
challenge for these countries is to decrease their reliance on European assistance and
to create, after 2013, national, easy-to-access support schemes for innovation.
It is evident that in the near future these Member States will have to find the right
balance between the requirement to consolidate public budgets and the need to
improve the impact and effectiveness of the existing policy mixes.

4
1. Objectives and Methodological Approach
This report analyses the mix of public funding for innovation policy in the EU Member
States and in competitor and emerging economies. It provides insights into trends in
annualised spending on national innovation support measures and the shifts in
funding patterns between 2008, as reported in the 2009 TrendChart European
Innovation Policy Report, and 2011. The report examines, in detail, a range of Member
States that have different levels of development and of sophistication in their
innovation systems.
The analysis is based on the reports for 48 countries produced by the INNO-Policy
TrendChart country correspondent network during the second half of 2011 and on the
European Inventory of Research and Innovation Policy Measures (EIRIPM).
A research and innovation policy measure is defined as any activity that:
• Mobilises resources (financial, human, organisational) through publicly (co-)
financed research and innovation programmes or initiatives; and/or
• Funds the generation or diffusion of information and knowledge (studies, road-
mapping, technology diffusion activities, advisory services, and public-private
partnerships) in support of research and innovation activities; and/or
• Promotes an institutional process (legal acts, regulatory rules) designed to
explicitly influence organisations undertaking research and innovation.
A policy measure is normally implemented on an on-going or multi-annual basis,
rather than being a “one-off event” or a “single project”.
The analysis adopts the EIRIPM categorisation that prioritises measures in five main
groups:
1) Governance and Horizontal Research and Innovation Policies;
2) Research and Technologies;
3) Human Resources (education and skills);
4) Enterprises;
5) Market and Innovation Culture.
As indicated in the 2009 European Innovation Policy Report, a number of official
statistics on public R&D spending exist that are based on the OECD/Eurostat manuals
for STI statistics such as Gross Domestic Expenditure on R&D (GERD) and
Government Budget Appropriations or Outlays on R&D (GBAORD). This report aims
to complement this data by providing more insights into actual budgetary spending
that capture certain measures that are not covered by the statistical definition of R&D
but are important for innovation.
It should be noted that there are limitations to identifying the budget that is allocated
to different policy priorities in some of the countries and thus, only rough estimates
can be made. For instance in the UK, the use of publicly-funded, private agencies to
deliver innovation measures makes it difficult to track the related budgets. In addition,
the database contains competitive programmes and does not include institutional
types of funding. It should also be remembered that different types of policy measures
have different funding needs such as research infrastructures or support for
innovation culture or supply versus demand-side types of instruments, and therefore
cannot be judged only in terms of absolute budgetary allocations.

Funding Innovation in the EU and Beyond 5

2. Trends in Funding the Innovation Policy Mix
2.1 Trends in EU Member States
The key factor influencing trends in the funding of research and innovation activities
since 2008 has, not surprisingly, been the financial and economic crisis.
Countries have responded differently to the crisis in terms of their research and
innovation policies. In some, commitments have been announced to defend
research and innovation budgets, as policy-makers see innovation as
being one way to respond to the dramatic downturns in GDP and to
increasing unemployment (please see Figure 1 for an overview). Thus, funding has
been stable or has even increased in specific instances. For example in Sweden, the
budgets of some innovation programmes were increased to compensate for the
decreases in the levels of venture capital funding from the private sector. Similarly in
Finland, France, Denmark and Germany, the R&D budgets grew during the economic
crisis, with increases in Finland of 0.8% in 2010 and 2.1% in 2011. Notwithstanding
these developments, governments’ abilities to comply with their funding promises are
expected to be greatly influenced by the knock-on effects of the ongoing euro-zone
crisis.
However, there are Member States in which major decreases occurred due to
the exceptional economic downturn and related public austerity
measures. Latvia, Bulgaria and Romania responded with unprecedented cuts in their
research and innovation budgetary allocations. Funding was also reduced in Belgium.
In Portugal funding levels remained balanced, but the need to decrease the public
deficit might lead to a reduction in public funding. Although the Spanish Government
drastically reduced its public expenditures, R&D and innovation budgets decreased
less than the average for other aspects of government expenditure. In the UK, efforts
were made to stabilise the budgets despite the public austerity measures. However,
whilst the science budget was preserved at around €5.6b, university budgets,
excluding research, were cut by 40% in 2010. In Bulgaria, no funding was allocated to
the National Innovation Fund in 2009 and 2010 and in Italy, the economic crisis
resulted in the large publicly-funded programmes being put on hold, with the
exception of projects co-financed by the Structural Funds. Austria announced
preferential treatment for research, innovation and education policies in terms of their
funding but nevertheless, there have been budget cuts for the private, non-profit, non-
university sector and for some of the innovation support activities.
In countries such as the Czech Republic, Slovakia, Slovenia, Poland and Estonia,
where Structural Funds are the main source of financing for R&D and innovation
policy budgets, there has not been much change in the overall funding levels. For
instance in Slovakia and Slovenia in 2009-10, there were no cuts in the financial
resources for R&D. In the latter country, resources for innovation support measures
only declined in spring 2011 and the government was questioned on whether it would
be able to maintain the budget allocation for R&D and innovation. In Hungary, there
was a disruption in funding as, in 2010, approximately 37% of the budget of the
Research and Technological Innovation Fund was frozen, but this was also due to
changes in the government and the resulting re-organisation. The key questions for
countries relying extensively on Structural Funds are still how to spend the available
funds and how to increase the absorptive capacity.

6
Several country reports flag up the dependence of research and innovation policy
budgets on the Structural Funds. This has meant that there is stability in funding but it
also represents an issue when thinking about what will happen after 2013, which is the
end of the current programming period. Some of the EU12 Member States strongly
advocate a commitment towards innovation objectives (please see Error! Reference
source not found. below). The Slovak Evaluation Report (2010) on the 2007
Innovation policy and the 2008 Innovation Strategy indicated that a future challenge
was to decrease reliance on European assistance and to create national, easy-to-access
support schemes for innovation after 2013. Notwithstanding, a key issue in those
countries with a predominance of Structural Fund subventions will be to plan for the
next Structural Funds programming period of 2014-2020 and, in certain cases, to
make a gradual shift from Structural Fund financing to financing from other sources.
A recurring theme in the funding of innovation policy is the search for increased
effectiveness and impact of measures. For instance, a clear impact of the deep
crisis in Ireland is a strong focus on ensuring the effectiveness of investment,
particularly in high-expenditure areas such as basic research in biotechnology and
ICT. In the UK, the funding of nine new university-based Centres for Innovative
Manufacturing is intended to maximise the impact of innovative research, support
existing industries and, more importantly, open up new industries and markets in
growth areas. It was also reported that Finland is giving more attention to the
effectiveness of its support instruments.
A consolidation or concentration of funds can be observed in half of the EU
Member States, which is related to the quest for more effectiveness and efficiency. For
example in Austria, there is a shift towards a reduced number of larger programmes,
both in terms of budgetary volumes and the activities supported. There is also a
tendency towards a theme management approach that uses a focus on themes such as
the grand challenges, as its aligning principle. The policy support system has been
streamlined in Denmark to improve effectiveness by focusing on a reduced number of
measures with larger budgets (please see Case 1 below).
Case 1 Streamlining the Policy Support System in Denmark

The financial and economic crisis has had an impact on the Danish economy. In response, the
Growth Forum (Vækstforum) was established, in 2009, as a platform to analyse the key
economic challenges in the changed circumstances. The forum comprised representatives of
industry, research and policy-makers and was tasked with providing policy recommendations.
Its resulting report concluded that the system of innovation support measures was complex and
that this hindered many small and medium-sized enterprises from becoming engaged in
innovative activities. A list of 37 specific policy initiatives was provided. These new initiatives
aim to strengthen the innovativeness of Danish enterprises and to streamline the policy support
system. The approach is to introduce new measures with larger financial means, to bundle
smaller measures into stronger instruments and to give greater visibility and accessibility to
successful measures.

Funding Innovation in the EU and Beyond 7

Similarly, an evaluation of the Finnish national innovation system by the Ministry of
Economy and Employment, in 2009, recommended a simplification of the
system, as the existing system was found to be complex and overlapping, in many
aspects. As a result, there is now a move towards a more broad-based and systemic
approach to innovation policy, where various different kinds of instruments and
approaches are combined to obtain an optimal policy-mix for each specific sector or
development area. In Sweden, after implementing the R&I bill2 in 2009, the twenty
Strategic Research Areas have been reinforced significantly and much of the funding is
distributed, in a concentrated way, to strong centres of excellence or research
consortia. In the Czech Republic, the aim of its reform of the research and innovation
system in 2011 was to simplify R&D support and concentrate the funding on 12
funding organisations, as distinct from the previous 22.
Figure 1 Changes in Research and Innovation Funding Levels between 2009 and 2011

Countries Overall funding GBAORD 2009 GBAORD

level, as detailed in (million €) 2010 (million €)
the TrendChart
reports

Austria increase 2.149,916 2.412,731

Belgium reduction 2.289,37 2.157,666

Bulgaria reduction 117,82 99,713

Cyprus reduction 83,97 72,215

Czech Republic even 870,254 893,93

Denmark increase 2.199,820 2.286,359

Estonia even 96,366 101,75

Finland increase 1.928,414 2.055,192

France even 17.513,119 16.360,33

Germany increase 20.832,593 22.569,408

Greece reduction na Na

Hungary reduction 426,56 468,620

Ireland reduction 941,26 872,086

Italy reduction 9.778,40 9.548,000

Latvia reduction 37,98 40,920

Lithuania even 69,856 46,98

Luxemburg even 195,447 233,54

Malta increase 9,445 11,685

Netherlands even 5.070,068 5.332,75

Poland even 1.051,668 1.474,55

2 Ett lyft för forskning och innovation, 'A Boost to Research and Innovation', Regeringens proposition
(Government bill) 2008/09:50

8
 Countries Overall funding GBAORD 2009 GBAORD
level, as detailed in (million €) 2010 (million €)
the TrendChart
reports

Portugal even with constraints 1.551,500 1.765,40

Romania reduction 360,43 353,260

Slovakia even 190,396 198,32

Slovenia even 244,958 265,36

Spain reduction 8.699,85 8.134,013

Sweden increase 2.661,751 3.089,868

UK even with constraints 10.916,489 11.210,31

Norway increase 2.348,335 2.697,538

Croatia reduction 312,45 311,863

US even with constraints 118.523,444 na

Japan increase 27.343,325 30.866,070

Brazil increase na na

China increase na na
Source: EUROSTAT GBAORD data and TrendChart mini country reports
Note: Dark green shading indicates an increase, light green an even or a similar amount of
expenditure, and red a decrease in funding levels for research and innovation, as reported in the
TrendChart “mini” country reports. The trends are also reflected in GBAORD data, with some
exceptions such as in the case of Latvia, where budget cuts were reported but the GBAORD data
shows an increase from 2009-2010.
Case 2 Estonia

The financial and economic crisis hit Estonia very hard with the government having to cut the
national budget by more than 10% and make other amendments to fiscal policy. Despite these
economic problems, the government has managed to maintain, and even to develop, innovation
policy.
In the current policy mix, the emphasis is placed on the development of knowledge and
technology transfer, the modernisation of technology, the internationalisation and international
mobility of research and business, supporting start-up companies and developing cooperation
between business and academia. Efforts to strengthen R&D and innovation activities seem to be
successful, which is evidenced by the fact that Estonia became an innovation follower amongst
the European countries (Innovation Union Scoreboard 2010).

Funding Innovation in the EU and Beyond 9

Shifts in priorities
In many of the countries there were no significant shifts in the main priorities
of research and innovation funding compared to the situation in 2009. Some trends
and dominant priorities can be observed across the countries such as foci on societal
challenges, on the commercialisation of research results, on young innovative
companies and on clusters and technology poles. All countries under review report
that they seek to develop and enhance knowledge exchange and collaboration between
business and academia in different contexts. A number of countries cite developing the
knowledge triangle – knowledge (research), education and innovation - as being a
particular challenge.
By analysing the funding allocated in 2010, to the five main policy priorities as defined
in the TrendChart database, it is evident that most of the EU Member States allocated
the majority of funding to “support measures within the Research and Technologies
category”, followed by “promoting and sustaining the creation and growth of
innovative enterprises”, and then “human resources” (please see Figure 2 below).
Figure 2 Top Policy Priorities in Research and Innovation Funding in the EU in terms
of their Order of Importance

Policy
priori*es


Research
and
Technologies


Promo4ng
innova4ve
enterprises


Human
Resources


Governance


Markets
and
innova4ve
culture


0
 20
 40
 60
 80
 100
 120


Note: This figure is based on information contained in the budgetary tables provided in the
TrendChart “mini” country reports. In terms of producing a realistic appraisal of priorities
across the EU, a simple addition of all of the budgetary allocations to each of the policy priorities
would have resulted in distortions due to the over-representation of countries with larger
research and innovation budgets and due to the unavailability of 2010 data on annual budget for
each policy measure. Thus, for each EU Member State, a value of 5 was given to the policy
priority that was allocated the most important share of its research and innovation budget, a
value of 4 was the given to the second most important share, and so on. The various countries’
values for each priority were then added together and the results are as shown above.
An increasing emphasis on the commercialisation of research results and
getting ideas to market is readily identifiable. For instance in Ireland, there
was a de-facto re-allocation of funding resources away from basic research to closer-
to-market research or enterprise development, innovation-support measures. In
Latvia, there was also a shift to funding innovative enterprises. In 2009, 49% of
funding went to measures under “research and technologies”, whilst in 2010 the
largest share of €31.3m is allocated under the “enterprises” category. Several new
start-up funds and support schemes were launched in 2010-2011, namely: the Start-up
Estonia scheme; the Brussels Capital Young Innovative Companies’ Scheme; National
Seed Fund in France; Support for the promotion and the development of New
Innovative Enterprises in Italy; Innovation Fund Ireland; the Dutch Valorisation
Programme; Equity Finance line for SMEs in Slovenia; and the Business Angel Fund
in Lithuania.

10
Along with a commercialisation focus on financial engineering, seed and venture
capital funding is a growing priority, particularly for supporting young innovative
companies (see Case 3 below).
In Greece, a new 'Entrepreneurship Fund’ was established during 2011, for the
provision of flexible funding to new ventures, including venture capital, start-up and
seed capital and business angel funding. Subsidised loans, guarantees and tax
incentives were introduced, at the expense of grant aid. In Austria, compared to
previous years, there is a tendency to allocate more funding to enterprise loans as well
as guarantees, whilst in the Netherlands, grants are being replaced by loans and
credits and fiscal measures such as tax credits.
In Finland, the TEKES funding that has been allocated for young innovative
companies has nearly quadrupled from 2008. TEKES also aims to strengthen funding
through Strategic Centres for Science, Technology and Innovations rather than
through traditional programmes. The intention is to focus on national strengths that
are able to be competitive in global networks.
Case 3 Finance for Innovation – Venture Capital and the Creation of Young Innovative
Companies

The issue of finance for innovation and venture capital appears time and again in the “mini”
country reports, as is the case for France, the UK, Ireland, Finland, Denmark and Lithuania.
A recent report on the different funding models for stimulating the creation of young innovative
companies (Reid and Nightingale, 2011) concluded that Europe does not necessarily lack the
capital but rather the infrastructure to increase the likelihood of commercial returns from
venture investing. Research has shown, and this is confirmed by the TrendChart analysis, that
there are significant variations in the VC industry in the EU with countries such as the UK,
France, Germany and the smaller Scandinavian economies being more developed than the rest.
Such differences may also reflect the sectoral composition of those economies that highlight the
existence or otherwise of high-tech industries, which are the traditional beneficiaries of VC
funding.
Overall, high-tech industries are under-developed in Europe. One problem is the lack of high-
quality, small firms that may conceivably grow quickly, which in turn reflects poorer quality
technology, as a consequence of lower R&D expenditure. Other problems include a lack of
concentration of entrepreneurial and managerial talent, a lack of capability within VC funds,
problems in the external environment such as the large number of hurdles that firms have to
overcome and an insufficient number of professional advisors with the skills to support high-
potential firms in their growth.
The report highlights a number of conclusions. Firstly, a strong body of evidence indicates that
the core problem facing the EU is not the lack of start-ups but rather the lack of growth in
companies. Thus, there has to be a shift in focus towards quality and the performance of the
small number of enterprises that drive economic growth and job creation. Other key findings
include: VC is only one part of a large, strongly inter-connected system; there is a need to align
public support flexibly to market and societal trends; and policy should incentivise private
venture capital funds by investing long-term in professionally managed schemes, scaling up
hybrid funds and closing ineffective investments, thus ensuring the early reallocation of funds to
winners.

Several new measures, related to societal challenges and green innovation, have
been introduced. Funding has been allocated to new research programmes,
particularly in the fields of environment, health, and energy. This is not simply a
thematic focus, as it is also linked to the demand side, since countries such as Belgium,
Denmark or Finland are increasingly active in demand-side measures to combine their
R&D efforts with supportive regulatory interventions. New measures include: the
Danish Green Development and Demonstration Programme; the national programme
for health and R&D, “Development of the Capacity of Health Science 2010-2015”, in
Estonia; the Lithuanian National Research Programme “Ecosystems in Lithuania:
climate change and human impact”; and the Polish Goal-oriented Projects launched by
the National Centre for Research and Development.

Funding Innovation in the EU and Beyond 11

Policy fields such as social innovation or public sector innovation are hot
topics but receive less funding, as only a few operational support
measures have been identified. For instance in Germany, funding research on
social innovation is part of the activities within the thematic R&D programmes such as
the programme on improving working conditions and the programme on service
innovation. In addition, a separate funding line on “Social Innovations for improving
the Quality of Life for the Elderly’ has been launched by the BMBF, or Federal
Ministry of Education and Research, in 2009, as a sub-programme of the “Research at
Universities of Applied Science Programme”. Another example is in Finland where
SITRA, the Finnish Innovation Fund, is currently experimenting with the promotion
of social innovations through different initiatives. The Finnish “Innovations in Social
and Healthcare Services Programme” supports the development of effective,
customer-oriented health and social services and more extensive preventive actions.
Shifts in the Forms of Funding
Tax credit schemes are clearly more important for some countries than others. This is
true for France, the UK and Ireland (please see Error! Reference source not
found. R&D Tax Credits). Today, in France, the R&D tax credit is now the main
funding instrument. Already, in 2008, it had allocated a total of €4.2bn or 60% of the
total public funding to businesses. A recent document on the R&D Tax Credit3, states
that this measure has also been an effective tool in combating the economic crisis. The
2011 Budget Act further eased the procedures and refined the conditions of eligibility
and introduced changes in the basis and methods for calculating the tax credit.
In Italy, there is a move away from direct support mechanisms towards
indirect support, mostly based on tax incentives to R&D and guarantees. Also new
fiscal incentives have been designed to foster research in SMEs.
The Austrian RTDI strategy places an emphasis on guarantees, liabilities, private
equity and credit-based instruments. The Austria, Wirtschaftssservice (AWS) has
recently allocated an increasing budget for loans, guarantees and liabilities, as well as
for venture capital4 focused on start-ups and technology transfer. In Belgium, there is
a wider use of reimbursable loans instead of grants in Wallonia and Brussels-Capital.
In several countries, such as Germany or Finland, there has been no change in the
types or methods of funding. Where the Structural Funds represent the
dominant share of research and innovation policy financing, the main
form of funding is through grants. This is the case in Estonia, the Czech
Republic, Hungary and Poland.

3 Crédit Impôt Recherche, un outil anti-délocalisation, juin 2011, Ministère de l’Enseignement supérieur et
de la recherche
4 Wirtschaftsbericht Österreich 2010.

12
Case 4 R&D Tax Credits

The importance of R&D tax credits is recognised across the countries as being a vital instrument
in promoting research and innovation within firms and in attracting mobile foreign R&D,
especially in a time of economic crisis.
To address the weak private R&D expenditure in France, the Research Tax Credit was adopted
in 1983. On the basis of a simple declaration, companies can benefit from a tax reduction for a
large range of research-related spending, including R&D personnel expenses, R&D
subcontracting and patenting costs. Various modifications in 2004, 2006 and 2008 have made
the research tax credit the most powerful innovation support tool in France. Recent evaluations
have shown the positive impacts that the measure has on business sector R&D expenditure.
In the UK, R&D tax credits also continue to represent the largest innovation support
instrument. Tax credits for SMEs investing in R&D were introduced in 2000 - 2001 and
extended to larger companies in 2002-03. The 2011 Budget Announcement stated that subject
to state aid approval, the rate of R&D relief for SMEs would increase from 175% to 200%, as of
April 2011. Subject to further state aid approval, the rate of SME R&D relief will increase to
225%, as of 1 April 2012. For larger companies, the tax relief on allowable R&D costs is 130%. A
recent evaluation undertaken by the UK Treasury, noted a general consensus across the UK that
tax relief for R&D expenditure results in higher levels of expenditure than might otherwise have
occurred. Other conclusions from the evaluation are:
• While analyses of UK claims show a wide range of cost-benefit estimates, indications are that
up to £3 of R&D expenditure may be stimulated by £1 of the tax sacrificed by the government;
• For SMEs, two thirds of claims and over 90% of the tax relief are for high-tech companies;
• Around 30% of claims each year are made by 'new' companies making R&D tax credit claims
for the first time; and
• The availability of R&D tax credits has little effect, however, on decisions to undertake specific
R&D projects.
In Ireland, improvements have been made during 2009-2011 to the R&D tax credits and the
government is now examining ways in which they can be made more attractive to SMEs. In
Denmark, although there was no previous direct tax incentive for research and development
from 2012, enterprises will be able to receive annual tax credits on R&D expenditures of DKK 5
million.
From UK and French studies, the lessons to be learned about tax credits include:
• Undertake a full ex ante assessment of the anticipated effects and impacts and ensure that a
comprehensive set of measurable objectives has been defined against which the success or
otherwise of the scheme may be monitored;
• Ensure beforehand that a detailed monitoring system is in place with harmonised databases;
• Ensure that professional service companies, supporting businesses in implementing the
instrument, develop a collective code of conduct;
• Limit the windfall effect of the tax credit and potential fiscal strategies from businesses;
• Target specific company segments such as high-tech SMEs.

Sources:
http://www.enseignementsup-recherche.gouv.fr/pid24835/credit-impot-recherche.html
Her Majesty’s Revenue and Customs (2011) “An evaluation of research and development tax
credits” at http://www.hm-treasury.gov.uk/consult_randd_tax_credits.htm

Sources of Financing
In terms of sources of financing, innovation policies rely either to a large extent on
national funding with other sources being very small or on financing from the
Structural Funds with only a small contribution from national budgets.
In general, international funding, other than the ERDF and the ESF, is less relevant.
There are, however, some exceptional cases. For example, in Germany, the European
Investment Bank made new loan commitments of about €3b in 2007/2008 for
enterprises and organisations.

Funding Innovation in the EU and Beyond 13

The role of regional budgets in R&D&I policy measures also remains marginal
compared to other funding sources.
The importance of the Structural Funds in financing research and innovation has
increased in some cases. In Wallonia, the total amount dedicated to research and
innovation activities for the period 2007-13 has increased by 30%, in comparison with
the previous programming period. The dramatically increased role of the Structural
Funds in the Czech Republic is particularly noticeable. It now represents €964m of the
total of €1,496m spent on RDI measures or 66% of the total expenditure with 62.5%
coming from the ERDF and 3.5% from the ESF. Similarly in Bulgaria, EU funds have
become the primary source of finance for R&D and innovation during the crisis. In
fact, R&D financing from abroad has compensated for the decline in national public
and private funding of R&D.
Public-private partnerships are becoming more significant, particularly in
the mobilisation of risk and venture financing, growth capital and other forms of
support and this is especially true for France, the UK and Ireland. It is now more
important than ever for public budgets to trigger a leveraging effect for private
investments in research and innovation. Also countries should introduce incentives to
keep the RDI activities of multinationals in place and to attract new R&D units of large
companies. In France the new “Investment for the Future” programme envisages
significant leverage of private sector funding, whilst in Ireland, a €500m “Innovation
Fund Ireland” has been launched to support enterprise development and job creation.
A contribution to this Irish fund of €250m is expected from the private sector. In the
Netherlands, the “Top Sector” approach (please see Case 5) expects a large
contribution private sources to the implementation of sector plans. Several R&D
collaborative measures have been launched that require public-private partnerships
such as the Green Growth 2011-2015 programme, in Finland, the UK Regional Growth
Funds and the Technological Research Institutes, in France.
Thematic and/or Sectoral foci
The majority of countries analysed do not have a clear thematic or sectoral
focus on funding. However, some exceptions can be identified in which a sectoral
focus has become more relevant (please see Error! Reference source not found.
below).
The share of thematic or sectoral funding ranges between 5% and 50%. For
instance in Sweden, approximately one third of funding can be regarded as having a
sectoral focus. This is also due to the selection of twenty Strategic Research Areas, as
mentioned above, in which the funding is concentrated.
Thematic funding plays an important role in Finland. Thematic instruments are
mainly financed through TEKES, although SITRA also has programmes that are based
on specific themes.
In Germany, the share of thematically or sectorally focused programmes amounts to
55%, if the funding of higher educational institutions and public research
organisations and the costs of policy governance are excluded from the total budget.
However, the thematic R&D programmes also include some measures such as the
“Top Clusters” and some funding for innovation networks in Eastern Germany. When
these more generic sub-programmes and initiatives are excluded, the share of
thematically or sectorally focused programmes in the total programme-based research
and innovation funding falls to about 50%.
In Lithuania about 20-25% of the total planned RTDI funding is reported to be
thematically or sectorally focused. In France, thematic or sectorally focused support
measures are more often designed in the case of research policies than in innovation.

14
Case 5 The Netherlands – Funding Top Sectors

The new Dutch enterprise policy - 20115 introduced by the Ministry of Economic Affairs,
Agriculture and Innovation (EL&I) outlines a sectoral approach with a cohesive policy agenda
for the following nine “top sectors”: Agro-Food; Horticulture and Propagating Stock; High Tech
Materials and Systems; Energy; Logistics; Creative Industry; Life Sciences; Chemicals; and
Water.
For each top sector, stakeholders are expected to develop a sector agenda. Approximately
€1.5bn has been earmarked for the nine sectors, mostly by re-allocating existing budgets.
Globalisation and societal challenges are seen as opportunities for businesses, where private
R&D investments should be increased and the exploitation of research results should be
fostered.
The new approach is much more demand-driven with close cooperation between the
government, businesses and knowledge institutes in the development of sector-oriented policy
agendas with the specific goals of removing obstacles to entrepreneurship and providing a good
business eco-system for innovation.

2.2 Trends beyond EU Countries

INNO Policy TrendChart includes an analysis of innovation policy trends in countries
outside the EU such as the EFTA countries, associated countries, BRICs (Brazil,
Russia, India and China), the USA, Japan and Israel.
• In EU associated countries such as Albania, Bosnia, Croatia, the former Yugoslav
Republic of Macedonia, Montenegro, Serbia and Turkey, the total R&D and
innovation funding available remains considerably below that of the EU27
average. Nevertheless, growing political support for innovation policy can be
observed in some of these countries.
According to its Strategy Development for Science 2010-2015, Bosnia invests around
0.07% of its GDP in R&D. In Serbia, the Ministry of Education and Science’s planned
budget for R&D activities in 2011 totals €96.14m, which is the same amount as for
2010 and includes a newly established Innovation Fund to strengthen innovation
policy funding. In the former Yugoslav Republic of Macedonia, three new innovation
policy measures were launched in 2010 and the funding planned for their
implementation was significantly increased. In Albania, the Strategic Programme for
Innovation and the Technology Development of SMEs during the period 2011-2016
provides funding for innovation projects. This initiative has a total budget of €10.31m,
of which €4.35m is allocated to the Innovation Fund that awards grants to SMEs.
Funding for research and innovation policy in Croatia has significantly decreased since
the crisis, as have the salaries for the whole public sector including researchers and
teachers at universities. Only one new support measure for innovative projects entitled
“Proof of Concept” has been launched. Policy-makers seem to be reluctant to increase
research and innovation spending, as it is difficult to attain immediate effects, even
though innovation should be viewed as a means to secure long-term economic growth.
The financial crisis has had a serious effect on those PhD students that have the status
of young researchers, as their scholarships have been temporarily abolished. In
addition, permanent employment contracts that were usually issued to them on
completion of their PhDs, have not been made available in many cases. Thus, many
young people with a science doctorate have had to cope with a dysfunctional labour
market and high unemployment rates. The financial and economic crisis reduced the
total R&D expenditure in 2009 to €383m, which was 0.83% of GDP, as compared with
€421m or 0.9% of GDP, in 2008.

5 Ministry of Economic Affairs, Agriculture and Innovation - “To the Top - Towards a new enterprise
policy”, 4 February 2011 Available at: http://english.minlnv.nl/txmpub/files/?p_file_id=2200574/

Funding Innovation in the EU and Beyond 15

Direct financial mechanisms are still the dominant form of funding in the innovation
policy mix. In Turkey, for example, the largest amount of funding is allocated as R&D
grants to firms and the public sector, including universities. Other forms of finance,
such as venture capital, are very limited. The national public budget is the key source
of funding, although international sources have been instrumental, in certain cases. A
strong source of support for innovation in the former Yugoslav Republic of Macedonia
is provided by international programmes. These include the 7th Framework
Programme (FP7), the Competitiveness and Innovation Framework Programme (CIP)
and EUREKA. International support from the EU, Italy and the United States is also
provided for the ICT sector in Albania. The EU Instrument for Pre-accession
Assistance (IPA) is increasingly being used to fund capacity building measures, albeit
at very low levels in all enlargement countries. The EIB also plays a part by providing
large loans for research infrastructures in countries including Serbia and Bosnia.
Key challenges in many of these countries are to increase awareness of the importance
of innovation activities and to allocate much higher budgets to research and
innovation support measures.
• In EFTA countries, innovation is expected to remain a budgetary priority.
Iceland reported a general reduction in funds for R&D but in Norway the levels of
research and innovation budgets have been maintained. Norwegian public support for
research and innovation in 2010, based on the updated figures from the EIRIPM
database, is estimated at around €463m. The Icelandic Government emphasises the
need to ensure that funding for R&D and innovation should be as high as possible.
In Switzerland, innovation policy is now receiving slightly more attention than in the
past. The relatively speedy growth in the budgets available for competitively
distributed funding indicates a move towards more competition-based funding. Given
the favourable national budget surplus, it is expected that innovation budgets will
increase. The Swiss situation in terms of the budgetary share of the five policy priority
categories has not changed much compared to 2009. The bulk of the funding falls
under the first two categories namely, Governance and Horizontal Research and
Innovation Policies and Research and Technologies.
• In BRICs, budgets for research and innovation policies are growing.
The economic crisis has had a milder effect on China. This country launched a €453bn
stimulus package in 2009, and has continued to support and promote science,
technology and innovation activities since then. R&D expenditure rose to €69.8b in
2010, a 23% increase compared to 2009 and a record high. All government funding
agencies have experienced budget increases. China’s R&D intensity has also risen to
consume 1.8% of its GDP in 2010, and this is a 1.5% increase compared with the figure
for 2008. China continues to place a significant emphasis on Governance and
Horizontal Research and Innovation Policies and also on Human Resources
Development. In contrast, the instruments designed to foster Innovation Culture and
to sustain the creation and growth of innovative Enterprise, remain relatively modest.
Applied research and R&D personnel development attracts most funding. Between
mid-2009 and mid-2011, the policy priorities have shifted further towards the
promotion of major science and technology breakthroughs, innovation development in
selected fields of pressing social needs and the enhancement of innovation capacity
through indigenous innovation activities. There have been no significant changes in
R&D funding with more than 70% continuing to come from the business sector and
about 20-25% from government.
In Brazil, innovation funding has also grown between 2009 and 2011, following the
anti-cyclical government expenditure, in response to the 2008 economic crisis. New
sectoral policy priorities were introduced in 2011 because of the loss of
competitiveness in some sectors. Although grants continue to be the normal method of
financing, funding for venture capital has increased, but early stage funding is still not
well-developed.

16
The competitive funding allocation in Russia has grown significantly and it now
constitutes well over 50% of public R&D funding. Venture capital has also gained in
importance. However, innovation activities are concentrated in public research
institutions, state-owned companies and design bureaus, with budgets either being
directly allocated from the federal budget or supplied through Federal Targeted
Programmes that have limited competition.
Although, in India, attention is being paid to innovation and the commercialisation of
technology in policies, there are gaps in implementation. Relevant departments and
ministries are not spending an appropriate share of their overall R&D budgets in
promoting innovation.
• In the USA, reductions in policy budgets, compared to the situation in 2009, can
be observed except in the case of research and technologies funding measures,
where budget levels were generally maintained.
• In Israel, innovation budgets were increased in response to the crisis. For
example, the budget for 2010 was 70% higher than that allocated in 2007.
• R&D expenditure and innovation support in Japan has also increased. Total R&D
expenditure was €153bn or ¥17.2 trillion, in 2009. Changes occurred in the
number of instruments and the funding schemes that were in place, most
significantly in the extension of funding to support new enterprises and market
expansion. However, the Japanese government faces severe fiscal challenges given
the public budget deficits that might also threaten research and innovation
funding.

2.3 Government Departments/Innovation Agencies and Budgets allocated for

Innovation
The government departments and national agencies responsible for innovation policy
in the countries covered in this report have experienced some notable changes in their
funding levels and/or in the division of tasks.
In a number of countries, the funding provided to innovation agencies and
government departments has been maintained, despite the difficult economic
context. In Belgium, the federal budget for science policy was reinforced in 2010,
reflecting the efforts made in previous years to consolidate the commitment to
supporting R&D. In Denmark, the budget for the key innovation agencies has
increased significantly and even doubling between 2009 and 2010 for certain
organisations such as the Danish National Advanced Technology Foundation and the
Danish Energy Agency. No significant changes were reported for Sweden, Germany
and France. Figure 3 below provides the estimated budgets for selected innovation
agencies in the EU.
However, budgets allocated to government agencies for innovation have
been cut in other countries. In Estonia, the total budget has decreased slightly
since 2008, as a result of the government’s austerity measures. Institutions in Ireland
and Bulgaria have also suffered reductions in innovation budgets, during the period
2009-2010.
Reallocations and consolidations between different government
departments or agencies can also be noted. In Latvia, the budget is
concentrated on a reduced number of agencies. Similarly, in the Czech Republic due to
the reform of the R&D and innovation system, the number of funding agencies has
been reduced.
In England, following the abolition of the regional development agencies, funding for
the Technology Strategy Board is expected to increase. In France, national agencies
were re-organised in 2009 and the French national innovation agency, Oseo
Innovation, has reinforced public efforts to promote innovation, especially in SMEs.

Funding Innovation in the EU and Beyond 17

In Slovakia, innovation-related organisations increased their importance and became
more dynamic. These included the Slovak Innovation and Energy Agency and the
Agency of the Ministry of Education, Science, Research and Sports, which is
responsible for the operational programmes in the areas of research and innovation.
The Slovenian Research Agency (SRA) and the Slovenian Enterprise Fund maintained
their funding levels, whilst the Slovenian Technology Agency did not have a stable
budget.
In Finland, a minor change in the funding allocated to TEKES and the increasing
funding of the Academy of Finland and Finnish universities has produced a slightly
increased focus on academic research. Funding for applied research and innovation
has been also strengthened, as in the case of support for young innovative companies.
Beyond Europe, notable shifts can also be observed. There have been cuts
in the innovation budgets of agencies in the USA and Russia, whilst
countries such as China and Brazil have increased their funding levels.
In the USA, most recent policy debates reflect a greater willingness to support science
but an increased reluctance to develop the role of government in commercial activities.
Agencies with a research orientation experienced slight cuts of 1% - 2% of their overall
agency budgets between 2010 and 2011. The more applied Energy Efficiency and
Renewable Energy programmes were cut by 18%, whilst the Department of Commerce
and the Small Business Administration suffered substantial budget cuts of 32% and
45%, respectively. However, the budget of the Department of Energy actually
increased by about 2%.
In Russia, science and innovation budgets were significantly reduced due to the
unfavourable economic conditions in 2009-2010. The situation has improved more
recently, and the lack of funding in the last few years will be compensated to a certain
extent by the size of budgets during 2011-2013. Roscosmos, the Russian Federal Space
Agency, was the only government body whose level of financing increased
substantially over the same period, with the 2010 budget being almost twice as much
as the 2008 budget.
In China, the key research and innovation funding agencies received budget increases
in 2010. The budgets of the National Natural Science Foundation and the Ministry of
Science and Technology increased by 20% and 24%, respectively. R&D investment in
the Chinese Academy of Science reached €2.53b6 in 2010, which represents an almost
12% increase compared with 2009.
In Brazil, the National Bank for Economic and Social Development’s innovation
budget almost doubled between 2009 and 2011, while the national Innovation Agency
(FINEP) was likely to more than double its innovation funding between 2010 and
2011.
In Japan, greater attention is being paid to technology development and exploitation
such as innovation promotion, the SBIR Programme and new energy ventures and the
related budget increased from €140m to €170m. There was also a decrease in the
budget used to support the diffusion of new energies, with the overall allocation being
reduced from €280m to €120m.

6 EUR 1 = CNY 8.8220 European Central Bank exchange rate on December 31, 2010.

18
Figure 3 Estimated Budgets of Key Innovation Agencies in the EU and Beyond in 2010
Country Innovation Agency Innovation Estimated share of the budget earmarked
budget for specific policy measures
managed

Spain Centre for Technological 827.44m (2010) 827, 44m - innovation in enterprises
Industrial Development
UK BIS €764m (2008/09) €110m - RCI; €180m estimated - Space
Norway Innovation Norway €662m (2010) €40m - R&D contracts; €21.5 - Start- up grants;
€107m - low and high risk innovation loans
France OSEO € 650m (2010)
Finland TEKES €611m (2010) Grants for company research, development, and
innovation activities and for public organisations
- €186m; Research funding for universities,
other HEIs and research institutes - €193m;
Loans for company development and innovation
activities - €155m; Funding for SHOKs' research
programmes - €99m
Lithuania Lithuanian Business €432m (2010) Non-technological innovations (E-business LT,
Support Agency Leader LT, Process LT, etc.) - €191m; R&D in
business (Idea LT, Intellect LT, Intellect LT+) -
€160.55m; cluster development-€25.1m; The
rest of funds are earmarked for innovation
management, innovation services and other
public services.
Poland Polish Agency for €426.3m (2010) Support mainly focused on the development of
Enterprises Development innovation capacity in SMEs.
UK TSB - Technology Strategy €356m (2011-12) CRD (all figures 2008-09) - €127m; KTN -
Board €22m; KTP - €29m; Energy - €17m; Innovation
platforms - €11m
Belgium IWT Agency for €253m (2010) R&D projects in companies - 40%; Strategic
Innovation by Science and Basic Science (including bursaries for
Technology researchers) - 26%; Technology Transfer - 10%;
Innovation centres and co-operative projects -
7%
Sweden VINNOVA €239m (2010) €62m (26 %) - cooperation programmes; €33m
(14 %) - strong R&D milieus; €16m (7 %) -
healthcare; €24m (10 %) - innovation for SME;
€24m (10 %) - knowledge triangle; €24m (10 %)
- ICT; €19m (8 %) - transport; €19m (8 %) -
innovation management; €12m (5 %) -
production and market; €5m (2 %) - global links.
Portugal IAPMEI, Institute for €188m (2010) Actual funding, regarding payments undertaken,
SMEs and Innovation and share of IAPMEI’s internal budget assigned
to the measures taken. It does not include:
financial engineering initiatives under FINICIA
and FINCRESCE; the budgets regarding
guarantees provided; and the contribution
towards the Fund for Company Concentration
and Consolidation and FINOVA.
Source: TrendChart “mini” country reports.

Funding Innovation in the EU and Beyond 19

3. Trends in selected Country Groups and Countries
This section analyses in more detail innovation funding trends in selected countries
with different phases of maturity of their innovation systems and different levels of
innovation performance, according to the following Innovation Union Scoreboard
classifications:
• Innovation leaders: Germany, Finland and the USA
• Innovation followers: The UK, France and Ireland
• Moderate innovators: Poland, Spain and the Czech Republic
• Modest innovators: Bulgaria and Latvia
The figures in the following sections provide an overview of the research and
innovation policy mix in terms of budgets, across the selected countries. The analysis
covers only grant schemes introduced in the European Inventory of Research and
Innovation Policy Measures by the country correspondent network. Budgetary
information on risk capital funding is incomplete and, in most cases, could not be
calculated for 2010 and thus, the form of subsidised loans is treated separately.
The policy priority categories include:
1) Governance and Horizontal Research and Innovation Policies;
2) Research and Technologies;
3) Human Resources (education and skills);
4) Enterprises; and
5) Market and Innovation Culture.
When comparing the policy mix in terms of grant schemes across the countries, the
following picture in Figure 4 emerges. In general, the priority Research and
Technologies is responsible for the largest share of the budget. In France, there is a
greater emphasis on Governance and Horizontal Research and Innovation Policies,
due to the large amount of funding channelled through the competitiveness pole
programme. In the USA, the budgetary figure of the “Emergency Economic
Stabilisation Act of 2008”, which is intended to restore stability to the U.S. financial
system, includes provisions for R&D and energy-related tax credits. In the UK the
“Innovation Platforms” scheme produces the high share in Market and Innovation
Culture. The Enterprises category has a higher share in Latvia and Poland.

20
Figure 4 Policy Priority Budgets in Selected Countries

3.1 Innovation Leaders: The Cases of Germany and Finland

In Germany, the composition of the research and innovation budget, the key funding
sources and the forms of funding have all not changed substantially since 2009. Public
funding by the Federal Government and State governments of research, innovation
and higher education is estimated to be approximately €39bn for 2010. The budgets of
the main research and innovation financing programmes, such as ZIM, thematic R&D
programmes and the ERP Innovation Programme, were increased in both 2009 and
2010 to widen the access to finance for those SMEs that were interested in
undertaking R&D.
The policy measures that were introduced in 2010-2011 added additional funding to
strengthen industry-science links and knowledge transfer (see Figure 5 below).
Figure 5 Recently introduced (2010-2011) Policy Measures and Budgets in Germany
Title of the measure Policy priority Annual budget
Validation of Innovation 2.2.2 Knowledge Transfer (contract research, < €10 million
Potentials (2010) licences, research and IPR issues in
public/academic/non-profit institutes)
Research Campus (2011) 2.2.2 Knowledge Transfer (contract research, ~ €15 million
licences, research and IPR issues in
public/academic/non-profit institutes)

The largest categories of expenditure are the funding of higher educational institutions
(HEIs) for research and education, which has €20.1bn or 52% of the total budget and
the funding of public research organisations outside the HEI sector, which was around
€7.7bn or 20% of the total in 2010. When analysing the grant schemes introduced in
the TrendChart database, the picture in Figure 6 develops. Most of the funding is
spent on the policy priorities “direct support to business R&D” and “research in
universities”. The substantial budget figures for cluster framework policies, public
research organisations and sectoral innovation confirm the emphasis placed on
fostering the commercialisation of research results.

Funding Innovation in the EU and Beyond 21

Figure 6 Distribution of Research and Innovation Policy Funding Grants amongst
Policy Priorities in Germany, in 2010 (Based on the ERAWATCH-TrendChart
database)

GDP decreased by 8.2%, in 2009, in Finland. This was followed by a recovery of 3.6%
in 2010 and continued growth since then. As in many other countries, a significant
fiscal package, in this case €6bn, or 0.3% of the Finnish GDP, was introduced in
response to the downturn. Separate from the measures that targeted infrastructure
and energy, the additional funding covered education, research and training, although
the share of RDI in these packages was relatively small. Finland’s spending on RDI is
up to 4% of its GDP and the stated aim is to maintain this level of expenditure.
The new measures reflect forthcoming changes in policy priorities and the importance
of responding to societal challenges. They are focused on sustainable economic
development and all address R&D cooperation.
Figure 7 Recently introduced (2010-2011) Policy Measures and Budgets in Finland

Title of the measure Policy priority Annual budget

Green Growth 2011 -2015 2.2.3 R&D cooperation (joint €79m (overall budget)
projects, PPP with research
institutes)
Green Mining 2011 -2016 2.2.3 R&D cooperation (joint €60m (overall budget)
projects, PPP with research
institutes)
Groove – Growth from 2.2.3 R&D cooperation (joint €6,123,900
Renewables 2010–2014 projects, PPP with research
institutes)
Electric vehicle systems 2011 2.2.3 R&D cooperation (joint €80m (overall budget)
-2015 projects, PPP with research
institutes)

22
Recent trends are an increasing focus on support for user-driven innovation, support
for the globalisation of business activities and an increasing emphasis on growth
entrepreneurship and finance for innovation, particularly for young innovative
companies. The largest share of funding channeled through grants is spent on R&D
cooperation, followed by schemes to strengthen research in universities. Not
surprisingly, innovation in services is also a relevant aspect to receive support. The
relatively high amount allocated to the measure “Stimulation of PhDs” reflects the
policy measure “Graduate School System” that was established with the aim of raising
the professional quality of the research workforce in the future and of increasing the
productivity of graduate studies.
Figure 8 Distribution of Research and Innovation Policy Funding Grants among Policy
Priorities in Finland, in 2010 (Based on the ERAWATCH-TrendChart database)

3.2 Innovation Followers: The Cases of the UK, France and Ireland
Although public expenditure cuts in the UK have been the order of the day, the
science budget that currently stands at €5.6bn remains untouched and research in
universities has been exempt despite the overall 40% cut in university budgets. In
general, there has been very little shift in policy goals or policy instruments. R&D tax
credits continue to represent the largest single innovation support instrument. A new
public company, UK Finance for Growth Limited, has been established to manage
SME finance schemes and to oversee all publicly funded venture capital schemes.
A number of measures have ended, with some new ones being introduced that are
mainly cross-Research Council programmes. In addition, some changes have been
made to the organisation or operation of some ongoing measures, including financing
measures and tax credits for R&D.

Funding Innovation in the EU and Beyond 23

Figure 9 Recently introduced (2010-2011) Policy Measures and Budgets in the UK

Title of the measure Policy priority Annual budget

Regional Growth Funds 2.2.3 R&D cooperation (joint projects, €1.6bn
PPP with research institutes)
Research Capital Investment 2.1.1 Policy measure concerning €125m (2011)
Fund excellence, relevance and management
of research in Universities

In the UK, public-private partnerships are becoming more significant, particularly in

the mobilisation of risk and venture financing, growth capital and other forms of
support. In addition, many support measures also seek to engage industry in co-
funding initiatives, particularly in those programmes that address major socio-
economic challenges and cross-cutting technology sectors and, especially, where the
establishment of multi-stakeholder networks is desired. A number of Technology and
Innovation Centres in high-value manufacturing are also being established to integrate
the activities of a number of existing high-performing centres and clusters.
Figure 10 Distribution of Research and Innovation Policy Funding amongst Policy
Priorities in UK, in 2010 (Based on the ERAWATCH-TrendChart database)

The funding that appears in the category “research infrastructure” reflects the support
measure “Large Facilities Capital Fund”, which finances the construction of new
facilities either nationally or internationally or the expansion or enhancement of
existing facilities. Since 2000, the UK Government has placed a greater emphasis on
the importance of researchers having access to state-of-the-art research facilities so
that the science base can retain and enhance its excellence.
The “UK Strategic Investment Fund” aims to invest in the basic capabilities for
industrial innovation, job creation and growth in a range of emerging industrial
strengths, including low carbon vehicles, wind and wave power and renewable
chemicals. It provides seed capital for a growth fund for high-tech companies and
invests in the swift rollout of high-speed broadband in the UK.

24
In France, policy priorities have not changed much since 2009 and they are now, as
then, focused on strengthening the public policy response to the challenges identified
in terms of business R&D and to connections between the public and private sectors.
In 2010-2011, a strategy defined in the 2009 National Research and Innovation
Strategy (SNRI) was being pursued to increase business R&D investment, improve
transfer from public research to innovation and foster SME growth through better
funding.
Significant budget resources have been allocated for research and innovation since
2009, notably through two initiatives; the “Roundtable for Industry” and “Investments
for the Future”, which is a huge public investment fund for research and innovation
with a total of €35bn coming from both the public and private sectors. Within
Investments for the Future, €3.5bn is dedicated to enhancing the value of research,
€3.09bn to financing businesses through Green loans, the National Seed Fund and
additional capital funding to OSEO, and €4.5bn to the digital economy. As a result of a
national industrial study, 23 industrial measures have been identified.
Figure 11 Recently introduced (2010-2011) Policy Measures and Budgets in France
Title of the measure Policy priority Overall budget
Transfer of Technologies 2.2.2 Knowledge Transfer (contract €900m
Acceleration Societies research, licences, research and IPR
issues in public/academic/non-profit
institutes)
Technological Research 2.2.3 R&D cooperation (joint €2bn
Institutes (IRT) projects, PPP with research
institutes)
Excellence Institutes in the 2.2.3 R&D cooperation (joint €1bn
field of carbon-free energies projects, PPP with research
institutes)
National Seed Fund 4.3.2 Support to risk capital No data

The overall balance of funding allocated to the different types of measures has
changed since 2009, mainly due to the 2008 reform of the Research Tax Credit.
France’s general innovation policy continues to focus on SMEs and the
implementation mechanisms on tax incentives. One support measure for young
innovative companies was introduced, which was reformed by the 2011 finance law.
In terms of grants, the two largest support measures are the “competitiveness poles”
scheme, and the funding to OSEO for research, development and innovation projects
that demonstrates the priority given to the commercialisation of research results and
business innovation. These two support measures are reflected in the first column and
the second column shown in Figure 12.

Funding Innovation in the EU and Beyond 25

Figure 12 Distribution of Research and Innovation Policy Funding Grants amongst
Policy Priorities in France, in 2010 (Based on the ERAWATCH-TrendChart database)

Ireland, once the “Celtic Tiger”, is now one of a number of countries that have
suffered badly from the consequences of the recent financial and economic crisis. In
response, bold measures have been taken to cut budget deficits and to make the
economy more competitive. Essentially, there has been a re-allocation of funds away
from research in HEIs to enterprise support measures.
As a consequence of the economic downturn, GBAORD and GOVERD (Government
intramural expenditure on R&D) have decreased since 2008. GBAORD was reduced
by 8% in 2010 with €872m compared to €941m in 2009. GOVERD went down to
€91m in 2010 from €140m in 2008. The number of PhDs has also been reduced
slightly in 2010. In relation to the types of research undertaken, 88% is applied
research, 8% experimental development and 4% basic research.
The installation of a new government, in March 2011, brought more emphasis to
commercialisation and close-to-market research funding, and a commitment to
change the R&D tax credit to make it more attractive to SMEs. Data from the Strategy
for Science, Technology and Innovation (SSTI) for 2006-13 shows that research
funding in the health, marine, environment and agri-food sectors has dropped, whilst
it has increased in the energy sector. SSTI sub-programme funding, entirely from the
public purse, decreased from €645m in 2009 to €566m in 2011.

26
Figure 13 Recently introduced (2010-2011) Policy Measures and Budgets in Ireland

Title of the measure Policy priority Annual budget

SFI-HRB-Wellcome Trust 3.2.1 Recruitment of researchers (e.g. fiscal No data
Biomedical Research incentives)
Partnership (2010)
Innovation Fund Ireland 4.3.2 Support to risk capital Total of €500m for the
fund

Ireland has introduced a number of new measures including the establishment of the
“Innovation Fund Ireland” to provide seed and venture capital to the enterprise sector.
Like other countries, the emphasis on close-to-market measures can be seen in
initiatives such as the Competence Centres and the Industry-Led Research
Programmes. Additionally, in 2009, the Science Foundation Ireland (SFI) has
developed a new support measure called the Technology Innovation Development
Award, which enables researchers to test the potential viability of a technique or
technology. Support measures such as Innovation Vouchers have been successful in
assisting small enterprises to link up with knowledge providers in the HEI and public
research organisation (PRO) sectors.
The policy mix in 2010 shows most funding is being concentrated on the priority of
R&D cooperation. The SFI Principal Investigator Programme accounts for most of the
budget in the category “recruitment of researchers”, which is one of the research
programmes funded with the objective of managing Ireland's technology foresight
investment in biotechnology and information and communications technology (ICT).
Figure 14 Distribution of Research and Innovation Policy Funding Grants amongst
Policy Priorities in Ireland, in 2010 (Based on the ERAWATCH-TrendChart database)

Funding Innovation in the EU and Beyond 27

3.3 Moderate Innovators: The Cases of Poland, Spain and the Czech Republic
In Poland, there has been a shift towards competitively-based funding as a result of
the intensified activities of the National R&D Centre. An analysis of the budgetary data
reveals a high concentration on the specific priorities of support for technology
transfer between firms, research infrastructures, direct support to business R&D and
R&D cooperation, including joint projects and PPP with research institutes.
Figure 15 Recently introduced (2010-2011) Policy Measures and Budgets in Poland
Title of the measure Policy priority Budget
R&D projects (NCBiR) 1.2.1 Strategic research policies The total budget of NCBiR in
2011: 609,777,000 PLN (approx.
Goal-oriented projects 1.2.1 Strategic research policies €134,698)
(NCBiR)
Lider (NCBiR) 3.2.3 Mobility of researchers
KadTech (NCBiR) 3.2.1 Recruitment of researchers
BroTech (NCBiR) 2.2.1 Technology transfer
Innotech (NCBiR) 2.3.1 Direct support of business
R&D

In terms of new support measures, the National R&D Centre launched three specific
programmes - the Lider Programme targeted at PhD graduates, the KadTech
programme and the Brotech programme with the objective of increasing the efficiency
and effectiveness of the technology transfer process between the science and industrial
sectors. In addition, strategic programmes were created in 2010 such as the “advanced
technologies for energy generation”, the “integrated system for reducing energy
consumption in the maintenance of buildings” and “technologies supporting the
development of safe nuclear energy”.
Figure 16 Distribution of Research and Innovation Policy Funding Grants amongst
Policy Priorities in Poland, in 2010 (Based on the ERAWATCH-TrendChart database)

28
Regarding the grants allocated to different policy fields, most of the funding in 2010-
2011 was dedicated to “technology transfer”, “research infrastructure”, “recruitment of
skilled personnel” and “direct support to business R&D”. The highest amount in the
policy priority category “Support to technology transfer between firms” reflects the
budget allocated to the measure “New investments with high innovation potential”.
This measure aims to support new private investments covering the application of new
highly-innovative, organisational and technological solutions in production and
services, including those leading to the reduction of any adverse impacts on the
environment. These measures are specifically designed to provide support for
investment projects related to the purchase and implementation of new technologies
that have been on the world markets for no longer than three years.
R&D and innovation is considered a main driver for the future competitiveness of
Spain that will help to overcome the crisis by promoting medium and high-tech
sectors, which have a high added value. Despite a 7.4% decrease in the total GBAORD
in 2011, the funds allocated to R&D and innovation increased in 2010, and 2011, by
21% and 29%, respectively. This represents an increase from €3.57bn in 2009 to
€5.6bn in 20117.
Figure 17 Distribution of Research and Innovation Policy Funding Grants amongst
Policy Priorities in Spain, in 2010 (Based on the ERAWATCH-TrendChart database)

The new Spanish National Innovation Strategy that began in 2010 reinforced the
financial support for R&D and innovation, especially in the case of risk capital, the
creation of human capital, public-private cooperation and knowledge transfer.

7 The data for 2010 and 2011 are the allocated budgets. The €3,570 m of 2009 is the real executed budget
which is far below the allocated budget for that year which was €4,777 m. This tendency may have changed
during the execution of the working programmes for 2010 and 2011.

Funding Innovation in the EU and Beyond 29

Public research organisations, knowledge transfer and the stimulation of PhDs
received most of the funding in 2010. Cluster framework policies and R&D
cooperation also account for a large share. Support for research infrastructures
accounts for approximately 11% of the funds, a much level lower than in 2009, when it
absorbed 18% of the available funding.
Figure 18 Recently introduced (during the course of 2010-2011) Policy Measures in
Spain (INNO Policy TrendChart “mini” country report, Spain, 2011)
Name Policy priority Main
Orientation
INNOCREDIT Innovative projects oriented to the It offers low interest credits for “soft”
(2011) renovation of the production innovative projects, such as the
model of firms. acquisition of new technologies,
modernising or renewal of automated
production lines, improvement of
production processes or adjustments
of ICT.
INNOCAMPUS Improvement of the quality and Commercialisation of research results,
(2011) excellence of the Spanish the creation of industrial property
universities for the benefit of rights and new technology based forms
society as a whole. or academic spin offs and technology
transfer. In fact 7 of the 9 objectives
and activities that are funded are
directly related to the production
sector.
Digitalisation New support line of AVANZA 2 ICT sector
programme which promotes or finances
(2011) company projects to digitalise
their activities
Energy efficiency New support line of AVANZA 2 Promotes the so called “green ICT
(2011) which finances the development of activities”, by financing projects of
systems and tools that permit: firms for a more efficient use of
better management of the use of energies in combination with ICT.
energy; the reduction of CO2, NOx
etc; the substitution of traditional
production processes by new more
efficient ones; and the
development of ICT applications
for electric cars.

Similar to the situations in other countries that are suffering from the economic crisis,
the reality for many companies in the Czech Republic means that they now place the
emphasis more on short-term survival rather than on long-term competitiveness.
Innovation policy in the Czech Republic is more focused on the supply side, although
greater attention is now being paid to the use of R&D outputs. A strategy of
international competitiveness, including a national innovation strategy annex, has
recently been adopted, focusing on excellence in research, cooperation between
research and business, entrepreneurship and human resources and on addressing any
weaknesses.
Some new measures have been announced for the period 2010 – 2016, which have
started recently, or will be launched in the near future. These include:
1. The ALPHA programme, with a budget of €310m, intended to increase R&D
intensity and effectiveness between the research and business communities;
2. The BETA public procurement programme;
3. The OMEGA programme with €2.5m for its first year to support applied social
science research and experimental development;

30
4. The competence centre programme, which has a budget of €250m and will run
until 2009. It is expected to create 35 centres containing at least three enterprises
and one public research organisation; and
5. The GESHER/MOST programme will use its €12m for applied research and
experimental development with Israel.
Figure 19 Recently introduced (2010-2011) Policy Measures and Budgets in the Czech
Republic
Title of the measure Policy priority Annual budget
Programme of applied 2.2.3 R&D cooperation (joint €50.28m (planned)
research and experimental projects, PPP with research
development ALPHA institutes)
Ministry of Health´s 2.1.2 Public Research €3,032,720 (actual 2010)
Departmental Research and Organisations
Development Programme III
Security Research for the 2.1.2 Public Research €4,955,480 (actual 2010)
Needs of the State 2010-2015 Organisations
Applied Research and 2.1.2 Public Research €5,242,760 (actual 2010)
Development of National Organisations
and Cultural Identity
Programme (“NAKI”)

The largest share of public RDI funding in the Czech Republic, some 31% in 2010, is
for research infrastructure establishment and operation. This is in contrast to previous
priorities in sectoral innovation in manufacturing, which now represents only 12% of
the policy measures and R&D cooperation at 8%. Other important areas of support
include R&D in universities with 10%, grants for business R&D with 8% and support
of innovative start-ups that has also been allocated 8%.
Figure 20 Distribution of Research and Innovation Policy Funding Grants amongst
Policy Priorities in the Czech Republic, in 2010 (Based on the ERAWATCH-
TrendChart database)

Funding Innovation in the EU and Beyond 31

3.4 Modest Innovators: The Cases of Bulgaria and Latvia
There have been few changes in innovation in Bulgaria during the last couple of
years. However, some negative developments have included cuts in funding to the
National Innovation Fund (NIF) and the National Science Fund (NSF). Over the past
few years, investment in R&D in Bulgaria, has continued at the low level of around
0.5% of the GDP. The economic crisis, together with an innovation system in its
infancy and under-developed governance structures, have all added to the problem.
This situation has resulting in swingeing cuts to the NIF, which had no allocation of
funding in 2009 and 2010, and to the NSF, the two main sources of competitive
funding. The vast majority of public sector funding, which is exclusively centralised, is
allocated to R&D institute running costs. On a more positive note, R&D funding in
absolute terms is slowly increasing as is business sector R&D but BERD8 is still one of
the lowest in Europe. However, regional disparities in funding are becoming fewer and
absorption capacity, while at a low level, is demonstrating some improvement.
The policy mix has not changed appreciably since 2009 and no new support measures
have been launched in the course of 2010-2011. The majority of national funds is
allocated to governance and horizontal policies. On closer inspection, it is evident that
some universities are undertaking more innovation activities. However, the small scale
of these activities and the withdrawal of funding from the NIF make such activities
insignificant in overall national terms. The public sector innovation is mostly in ICT.
Figure 21 Distribution of Research and Innovation Policy Funding Grants amongst
Policy Priorities in Bulgaria, in 2010 (Based on the ERAWATCH-TrendChart
database)

8 Business Expenditure on Research and Development

32
Policy trends in Latvia are linked to the programming of the Structural Funds. Across
the five categories of measures, the creation and growth of innovative enterprises
receives the largest allocation of funding with 33% of the total budget, followed by
human resources with 26%, research and technologies with 24% and governance and
horizontal policies that have 16.5%. This is a change from the previous report when
research and technologies received 49% of the funding and all the other categories
received much less and also when 19 of the 28 measures targeted HEIs and research
institutes. This change has occurred as a result of the new government priority placed
on manufacturing and exporting activities. With the introduction of the Competence
Centres Programme and the National Research Centres Programme, the focus of
funding will undergo further changes in the future.
Figure 22 Distribution of Research and Innovation Policy Funding Grants amongst
Policy Priorities in Latvia, in 2010 (Based on the ERAWATCH-TrendChart database)

A new measure of note is the Competence Centre programme for the years of 2011-
2015. In response to the economic crisis, government policy focused on increases in
manufacturing and exports and this set the background for the re-distribution of
Structural Funds for innovation measures. Some measures were terminated, such as
support for establishing IPR, and the budgets of other innovation support measures
were reduced. The Educational Innovation Fund was closed in 2009, which provoked
widespread discussion and debate. Funding for the national research programmes,
which promote the market-oriented research scheme, was not cut. In late 2009, a new
measure entitled “Attraction of Human Resources to Science” was launched. The
Competence Centre programme envisages the modernisation of 30 selected institutes
that will collaborate through nine National Research Centres. There will also be virtual
facilities designed to provide the framework to manage and maintain the research
infrastructures.

Funding Innovation in the EU and Beyond 33

Figure 23 Recently introduced (during the course of 2010-2011) Policy Measures and
Budgets in Latvia
Title of the measure Policy priority Annual budget
National Research Centres 1.2.1 Strategic Research policies No data
Programme (2010) (long-term research agendas)
Competence Centres 1.2.1 Strategic Research policies No data
Programme (2010) (long-term research agendas)
State Research Programmes 1.2.1 Strategic Research policies No data
(long-term research agendas)
State Research Programme 1.2.1 Strategic Research policies €1.14m
“Energy and Environment” (long-term research agendas)
LATENERGI
State Research Programme 2.1.2 Public Research Organisations €1.14m
“Innovative Materials and IT”
IMIS
State Research Programme 2.1.2 Public Research Organisations €1.14m
“Local Resources” NatRes
State Research Programme 2.1.1 Policy measures concerning €1.14m
“National Identity” VPPNI excellence, relevance and
management of research in
Universities
State Research Programme 1.2.1 Strategic Research policies €1.14m
PUBLIC HEALTH (long-term research agendas)

3.5 Non-EU Countries: The Case of the USA

In the USA, research and technology budgets have not changed substantially,
although the overall innovation policy budgets have experienced reductions. With the
exception of the Computing Research Infrastructure measure that had its funding
decreased in 2010, the other research and technology budgets are either flat or have
increased. This is due to the fact that in 2009 and 2010, the US introduced a stimulus
package to help combat the effects of the economic downturn. This budget primarily
reflects federal grants, with the exception of the R&D tax credit estimates, which are
lower for 2010 than for 2009.
In addition, administrations at state level have also grappled with the economic
downturn and many have made substantial cuts to research and innovation
investments, which are more severe than those made to the federal budget. For
example, California and Texas have projected budget shortfalls for the fiscal year 2012
of €18.1 billion or $25.4 billion which is 29% of the budget for the fiscal year 2011, and
€9.6 billion or $13.4 billion, which is 32% of the budget for the fiscal year 2011,
respectively. However, Indiana’s shortfall is only €192.9 million or $270 million,
which is 2% of the budget for the fiscal year 2011.9
In terms of thematic or sectoral foci, energy research is a high priority in the current
administration. Likewise, the emphasis on health information technology to reduce
health care costs has a built-in, multi-year trajectory with planned increases in future
budgets.

9 Donald J. Boyd (2011), State & Local Financial Update. New York: Rockefeller Institute of Government,
March 19, 2011, Accessed September 30, 2011

34
Figure 24 Recently introduced (2010-2011) Policy Measures and Budgets in the USA

Title of the measure Policy priority Annual budget

I6 Challenge 1.3.1 Cluster framework policies €4,3m
Regional Clusters Initiative 1.3.1 Cluster framework policies €4,3m
Start-up America 4.3.1 Support to innovative start- No data
ups incl. gazelles

Figure 25 Distribution of Research and Innovation Policy Funding amongst Policy

Priorities in the USA, in 2010 (Based on the ERAWATCH-TrendChart database)

Funding Innovation in the EU and Beyond 35

Appendix A Estimated 2010 budgets for selected countries by main categories of research and innovation
measures (millions, euro)

Country Main categories of research and innovation measures Comments

Governance Research and Human Promote and Markets and
and horizontal Technologies resources sustain the innovation
research and (education and creation and culture
innovation skills) growth of
policies innovative
enterprises
Bulgaria 8,16 119,21 9,6 166,94 49 • Decreasing funding trend.
• No funds allocated to NIF in 2009 and 2010 and much reduced to NSF.
• Structural Funds play a key role, particularly in Research and Technologies,
HR, Markets and Innovation Culture.
China 4,194 1,263 na na (€1 b to na • Increasing trends – 23% increase in STI in 2010.
end 2008)
• no major changes in support measures
• Mainly grants.

Czech 42 933 60 338.9 12 • funding to research and technologies (64%) and innovative enterprises
Republic (28%) dominates.
• governance, horizontal research and innovation policies primarily
consisting of cluster development (€30.1m)
• five new measures recently launched under research and technologies.
Research infrastructure now has priority.
• HRD consists of job training for researchers and others involved in
innovation
• Main instruments under innovative enterprises are: sectoral support in
manufacturing (€182.4m) and support tot innovative start-ups (€111.5m)

36
Country Main categories of research and innovation measures Comments
Governance Research and Human Promote and Markets and
and horizontal Technologies resources sustain the innovation
research and (education and creation and culture
innovation skills) growth of
policies innovative
enterprises
Finland 990 2,055 1,730 357 47 • Aim is maintain RDI spend at around 4% of GDP.
• 44% of the annual R&D budget governance, horizontal research and
innovation policies, of which research in universities (56%) and promotion
of industry (24%)
• In supporting innovative enterprises, Tekes allocated €186m in grants and
€155m in loans in 2010.
• In markets and culture, the Ministry of Employment and Economy
committed €41m to promoting the business sector
France 610 510 na 816 3,226 fiscal • Funding increases, particularly for two new instruments: (i) Instrument for
and financial the Future, and (ii) Roundtable for Industry.
incentives
• No major changes in policy priorities.
• Governance, horizontal research and innovation policy budget focused on
competitiveness clusters and innovation development
• Majority of the research and technologies budget (€448m) for OSEO
measures – industrial innovation, business R&D
• Majority of innovative enterprises budget (€775m) in support to start-ups
(including gazelles) and risk capital)
Germany 10,400 7,800 20,100 200 <100 • Creation and growth of innovative enterprises category includes
investments in the High-tech Start-up Fund and the ERP Start-up Fund
• Markets and innovation culture budget figure comprises three small
Federal programmes (SIGNO, Innovation Competence East, Innovation
Vouchers)
Ireland 2.2 183 2.6 (2009 151 0.6 • Comparable funding levels for industry related measures; cuts in allocation
figure) to HEIs
• Human resources and innovative enterprises categories slightly increased
from 2009
• Innovative enterprises funding to seed and venture capital funds, and
capacity and capability building; new measure – Innovation Fund Ireland

Funding Innovation in the EU and Beyond 37

Country Main categories of research and innovation measures Comments
Governance Research and Human Promote and Markets and
and horizontal Technologies resources sustain the innovation
research and (education and creation and culture
innovation skills) growth of
policies innovative
enterprises
Latvia 16 23 25 31 0.8 • Planned expenditure in the next two years in all five categories is expected
to remain the same
• No innovation policy changes of note in Latvia since the last report.
• Policy trends are linked to the programming of Structural Funds
• Change from the previous report when the largest share of funding was for
‘research and technologies (49%) with the other categories receiving much
less funding, and where the majority of measures targeted HEIs and
research institutes.
• No tax incentive scheme for R&D expenditure or IP and patents
Poland 110 498 161 341 6
UK 3.2 2,799 162 615 264 • No major changes in funding levels, policy goals or instruments.
• R&D tax credits largest instrument.
• New initiatives in the creation of technology and Innovation Centres (TICs)
and Centres for Innovative Manufacturing
• Most governance, horizontal research and innovation policy budget do not
have accessible budget lines. Actual expenditure for a foresight programme.
• Figure for research and technologies most likely an overestimate as
measures also encompass rationales/objectives reflected under other
headings. No discernable trends.
• Innovative enterprises figure problematic as nature of measures (agency
support or capital stimulation) means many are not annualised. Possible
upward trend.
• Under markets and culture, potentially increasing emphasis on public
procurement support, although a minor part of the innovation policy mix.
USA 953 2,746 250 139 3,746 • With the exception of tax incentives under markets and culture category,
primarily grants

38
Appendix B Budget of innovation agencies in the EU and beyond

Country Innovation Agency Innovation budget Estimated share of budget earmarked for specific policy measures
managed
Austria Austrian Wirtschaftsservice € 123.4m in 2010 € 0.7m for HRD; € 84.7m for growth of innovative enterprises; € 16.7m for markets and
innovation culture; € 21.3m which cannot be clearly allocated
Belgium Innoviris €37.4m Enterprises: 35%; Spin-off in Brussels: 4%; Strategic Platform & impulse programmes: 20%;
Non-economic aim: 10%

Belgium IWT Agency for Innovation by Science and €253m in 2010 R&D projects at companies: 40%; Strategic Basic Science (including bursaries for researchers):
Technology 26%; Technology Transfer: 10%; Innovation centres and co-operative projects: 7%

Bulgaria Bulgarian SMEs Promotion Agency 2.05m The entire funding of the NIF for 2009, 2010, and 2011 went to projects already approved;
funding is project-based, thus, not earmarked for any specific policy measure
Czech Technology Agency of the CR €32.7m (2011) The only measure is the programme Alpha with allocated funds since 2011
Republic
Denmark Danish Enterprise and Construction 30m Business Innovation Fund; Innovation of green solutions and welfare solutions (25%); Market
Authority maturation of green solutions (30%); Market maturation of welfare solutions (22%);
Conversion of hard-hit areas (22%)

Estonia Enterprise Estonia Foundation €36.5m Investments into test- and semi-industrial labs €0.35m (1%); Technology investments of
industrial enterprises €14m (38%); Knowledge and technology transfer (SPINNO programme)
€1.2m (3%); Product development €10.9m (30%); Involvement of innovation staff €0.1m
(0.3%); Business incubators €0.2m (0.5%); Cluster development €0.6m (1.6%); Competence
Centres €8.2m (22.5%); Innovation vouchers €0.6m (1.6%).
Finland TEKES €611m Grants for companies research, development, and innovation activities and for public
organisations €186m; Research funding for universities, other higher education institutes and
research institutes €193m; Loans for companies' development and innovation activities €155m;
Funding for SHOKs' research programmes €99m

France OSEO € 650m in 2010

Germany Federal Ministry for Economics and €2.7b
Technology
Iceland Innovation Centre Iceland € 2,500,000 About 50% or 1,250,000 (for all measures on entrepreneurship, testing, Impra etc.)

Funding Innovation in the EU and Beyond 39

 Country Innovation Agency Innovation budget Estimated share of budget earmarked for specific policy measures
managed
Ireland Enterprise Ireland €107m (2010) for Funding for Technology and Scientific Infrastructure (23% of total Enterprise Ireland grant
applied allocation)
research/innovation
support measures
Latvia Investment and Development Agency of €40.7m €29.5m earmarked for high value added investments;
Latvia €4.7m earmarked for development of new products and technologies.

Lithuania Lithuanian Business Support Agency €432m €191m earmarked for non-technological innovations (E-business LT, Leader LT, Process LT,
etc.);
€160.55m earmarked for R&D in business (Idea LT, Intellect LT, Intellect LT+); €25.1m
earmarked for cluster development; The rest of funds earmarked for innovation management,
innovation services and other public services.
Luxemburg Luxinnovation €3.9m (2011)
Malta Malta Enterprise €11.5m At end of 2010 a total of: 26 Grant Agreements amounting to €1,718,577.83 were signed for
Small Start-up; 50 Grant Agreements amounting to €3,859,557.66 under Innovation; 11 Grant
Agreements amounting to €607,837.45 under Environment; 58 Grant Agreements amounting
to €2,465,042.15 under e-Business; 17 Grant Agreements amounting to €1,856,283.65 under
Research and Development; 100 Grant Agreements amounting to €6,061,024.01 under
International Competitiveness; and 137 Grant Agreements amounting to €7,817,302.51 under
Energy
Moldova Agency for Innovation and Technology €0.9m €610,000 earmarked for Innovation and Technology Transfer Projects
Transfer of the ASM (AITT) €250,000 earmarked for S&T parks and incubator support

Netherlands NL
Norway Innovation Norway €662m €40m earmarked for R&D contracts; €21.5 earmarked for Start- up grants; €107m earmarked
for low and high risk innovation loans

Poland Polish Agency for Enterprises Development €426.3m (2010) Support mainly focused on the development of innovation capacity in SMEs.
Portugal IAPMEI, Institute for SMEs and Innovation 188m Actual funding, regarding payments undertaken, and (ii) share of IAPMEI’s internal budget
assigned to the measures taken. It does not include: financial engineering initiatives under
FINICIA and FINCRESCE; the budgets regarding guarantees provided (3 887 316 thousand
Euros); and the contribution towards the Fund for Company Concentration and Consolidation
(95 600 thousand Euros) and FINOVA.
Serbia Innovation Fund of Republic of Serbia €1.5m in 2011 €1.5m in 2011 for new programme starting in 2011

40
 Country Innovation Agency Innovation budget Estimated share of budget earmarked for specific policy measures
managed
Slovakia Slovak Innovation and Energy Agency €162m Some 93% of the total innovation budget went to ‘innovation and technology transfers’, some
7% to ‘innovative activities in enterprises’. (Approved assistance to calls on innovations and
technology transfers). Total SIEA budget supported from the Structural Funds was about
€498m in 2010.
Slovenia Slovenian Technology Agency- TIA €82.2m Strategic R&D projects: 14.1%; Joint development investment projects: 70%. ; Financial
assistance to institutions supporting innovation activity: 1.2%; Young researchers from business
sector: 11.4%
Spain CDTI Centre for Technological Industrial 1680,9m 827, 44m innovation in enterprises, 853,46 science and technoloyg parks together with the
Development Autonomous Organisation of National Parks
Spain DGTTDE DG of technology transfer and 1472,73m Technology transfer and enterprise development
enterprise development
Sweden VINNOVA €239m Earmarked: €62m (26 %) cooperation programmes; €33m (14 %) strong R&D milieus;
€16m (7 %) healthcare; €24m (10 %) innovation for SME; €24m (10 %) knowledge triangle;
€24m (10 %) ICT; €19m (8 %) transport; €19m (8 %) innovation management;
€12m (5 %) production and market; €5m (2 %) global links.

Turkey TUBITAK €146m (for 2010) €144m earmarked for industrial R&D (grants); €0.45 allocated as start-up support; €1.4m
earmarked for IPR protection support

UK TSB - Technology Strategy Board €356m (2011-12) €127m CRD (all figures 2008-09)
Includes delivery of €22m KTN
grant for R&D and €29m KTP
Technology Innovation €17m Energy
Centres €11m Innovation platforms

UK BIS - Department for Business, Innovation €764m (2008/09) €110m RCIF

and Skills €180m estd Space
Technical Infrastructure (€?)

USA Department of Commerce €611.9m €52.6 million for technology commercialisation (Technology Innovation Program); €89.3
million for technology deployment (Manufacturing Extension Partnership)

Funding Innovation in the EU and Beyond 41

Appendix C Methodological remarks

Figure 1: Based on a calculation of absolute figures provided in the TrendChart mini country
reports (where data was available) we would get a different picture, where most of the total
funding is allocated to human resources, then on research and technologies and on
governance and horizontal measures. This picture is distorted though by the data of larger
countries, such as Germany (spending on 20,1b on human resources taking into account
institutional funding and 10,4b on governance and horizontal measures, moreover the figures
are misleading since estimations could not always be made for 2010 only.

Total figures:
Priority Total budget (in million euro)
1 Human Resources 24.135,22
2 Research and Technologies 23.563,53
3 Governance and horizontal measures 15.886,81
4 Promoting innovative enterprises 6.416,50
5 Markets and innovation culture 1.853,28
Total 71.855,34

Figure 3-23: Missing values have been excluded from the analysis. Reasons for the lack of data
vary per country and per measure. The budget year reported can vary per country. As a result
not all data report on the budget allocated for the year 2010. The specific cases are reported in
below:

Budget year non-2010:

Country Title of the measure Measure Measure Budget

Classification no. Type Year
Bulgaria Establishment of clusters 1.3.1 grant 2009
Bulgaria Establishment of entrepreneurship centres at 4.2.1 grant 2009
universities
Ireland HPSUs - High Potential Start-Up companies 4.3.1 grant 2009
Ireland Health Research Awards 3.2.2 grant 2009
Ireland Strategic Research Cluster Programme 2.2.3 grant 2009
Ireland President of Ireland Young Researcher Awards 3.2.2 grant 2009
UK Sciencewise 3.1.1 grant 2009

42