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The Role of SMEs in Innovation in the EU. A Case for Policy Intervention?

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  • R. Veugelers

Abstract

Innovation policies, addressing the barriers that inhibit Small- and Medium-Sized Enterprises (SMEs) to innovate, have the potential to be extremely effective. Nevertheless, as this article will illustrate, market failure for innovating SMEs needs to be carefully identified, to better target government policies. And even if policy is well targeted, there could still be failures in implementation, as the evidence from actual policies being implemented in the EU and elsewhere suggest. In order to support policy making for stimulating innovation at SMEs, this article first reviews the empirical evidence on the contribution of SMEs to innovation, examining whether the barriers to innovation are related to market failures and whether SMEs are affected more by market failure induced barriers. We also take a look at trends in actual SME innovation policies in Member States and at EU level and how they have been evaluated on effectiveness. A concluding section channels the insights from this evidence into suggestions for improving policies towards SMEs and Innovation. The potential for specific SME Innovation policies, towards Young Innovative Companies (YICs) with radical innovations is identified.

Suggested Citation

  • R. Veugelers, 2008. "The Role of SMEs in Innovation in the EU. A Case for Policy Intervention?," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(3), pages 239-262.
    • Handle: RePEc:ete:revbec:20080302
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    Citations

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    Cited by:

    1. David Audretsch & Agustí Segarra & Mercedes Teruel, 2014. "Why don't all young firms invest in R&D?," Small Business Economics, Springer, vol. 43(4), pages 751-766, December.
    2. Balsmeier, Benjamin & Delanote, Julie, 2015. "Employment growth heterogeneity under varying intellectual property rights regimes in European transition economies: Young vs. mature innovators," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 1069-1084.
    3. Heike Belitz & Anna Lejpras, 2016. "Financing patterns of R&D in small and medium-sized enterprises and the perception of innovation barriers in Germany," Science and Public Policy, Oxford University Press, vol. 43(2), pages 245-261.
    4. Jean Acheson & Rory Malone, 2020. "Respect Your Elders: Evidence from Ireland’s R&D Tax Credit Reform," The Economic and Social Review, Economic and Social Studies, vol. 51(1), pages 105-131.
    5. H. T. Tran & E. Santarelli, 2013. "Determinants and Effects of Innovative Activities in Vietnam. A Firm-level Analysis," Working Papers wp909, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Enrico Santarelli & Hien Thu Tran, 2017. "Young innovative companies: Are they high performers in transition economies? Evidence for Vietnam," The Journal of Technology Transfer, Springer, vol. 42(5), pages 1052-1076, October.
    7. Dirk Czarnitzki & Julie Delanote, 2013. "Young Innovative Companies: the new high-growth firms?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(5), pages 1315-1340, October.
    8. repec:diw:diwwpp:dp1353 is not listed on IDEAS
    9. Nguyen Thi Oanh, 2019. "The Relationship between Innovation Capability, Innovation Type and Innovation Performance in FDI Enterprises in Vietnam," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(8), pages 1-28, August.
    10. Raphaël Chiappini & Samira Demaria & Benjamin Montmartin & Sophie Pommet, 2020. "Can Direct Innovation Subsidies Relax SMEs' Credit Constraints?," GREDEG Working Papers 2020-09, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    11. Colombelli, Alessandra & Grilli, Luca & Minola, Tommaso & Mrkajic, Boris, 2020. "To what extent do young innovative companies take advantage of policy support to enact innovation appropriation mechanisms?," Research Policy, Elsevier, vol. 49(10).
    12. Boban Stojanovic & Sneyana Radukic, 2012. "Potential for Innovation and Competitiveness of Serbian Small and Medium Enterprises," Book Chapters, in: João Sousa Andrade & Marta C. N. Simões & Ivan Stosic & Dejan Eric & Hasan Hanic (ed.), Managing Structural Changes - Trends and Requirements, edition 1, volume 1, chapter 17, pages 334-345, Institute of Economic Sciences.
    13. Dirk Czarnitzki & Julie Delanote, 2015. "R&D policies for young SMEs: input and output effects," Small Business Economics, Springer, vol. 45(3), pages 465-485, October.
    14. Daria Ciriaci & Pietro Moncada-Paternò-Castello & Peter Voigt, 2016. "Innovation and job creation: a sustainable relation?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(2), pages 189-213, August.
    15. Robbins Peter & O’Gorman Colm, 2016. "Innovation processes: do they help or hinder new product development outcomes in Irish SMEs?," The Irish Journal of Management, Sciendo, vol. 35(1), pages 88-103, April.
    16. Kleine, Marco & Heite, Jonas & Huber, Laura Rosendahl, 2022. "Subsidized R&D collaboration: The causal effect of innovation vouchers on innovation outcomes," Research Policy, Elsevier, vol. 51(6).
    17. Niccolò Ghio & Massimiliano Guerini & Cristina Rossi-Lamastra, 2016. "University knowledge and the creation of innovative start-ups: an analysis of the Italian case," Small Business Economics, Springer, vol. 47(2), pages 293-311, August.
    18. Tulus Suryanto & Darul Dimasqy & Reza Ronaldo & Mahjus Ekananda & Teuku Heru Dinata & Indra Tumbelaka, 2020. "The Influence of Liberalization on Innovation, Performance, and Competition Level of Insurance Industry in Indonesia," Sustainability, MDPI, vol. 12(24), pages 1-25, December.
    19. Dirk Czarnitzki & Marek Giebel, 2021. "Financial Constraints for R&D and Innovation: New Evidence from a Survey Experiment," Working Papers of Department of Management, Strategy and Innovation, Leuven 683800, KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven.
    20. Cerpentier, Maarten & Schulze, Anja & Vanacker, Tom & Zahra, Shaker A., 2024. "Employment protection laws and the commercialization of new products: A cross-country study," Research Policy, Elsevier, vol. 53(7).
    21. Waqar Wadho & Azam Chaudhry, 2019. "Identifying and Understanding High Growth Firms in the Pakistani Textile and Apparel Sectors," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 24(2), pages 73-92, July-Dec.

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    Keywords

    SMEs; Innovation; Policy; YICs;
    All these keywords.

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