On young highly innovative companies: why they matter and how (not) to policy support them

Abstract

Recent policy initiatives in the EU aim at supporting so-called Young Innovative Companies (YICs). This paper provides empirical evidence from German CIS data on the innovative performances of this specific type of firms, supporting why they matter. We first characterize YICs in the sample of innovation active firms.We show that firms that combine newness, smallness and high R&D intensity, are rare in the sample of innovative firms, but achieve significantly higher innovative sales than other innovative firms, especially innovative sales that are new to the market. Not surprisingly, YICs view financial constraints, both internal and external, as an important factor hampering their innovation activities, significantly more so than other innovation active firms. This access to finance problem is an often used motive for government intervention. In our German sample, subsidies schemes for innovation are general and not particularly targeted at YICs. We empirically assess the effectiveness of these public funding schemes. We find that these are not effective to increase the innovative sales of YICs, unlike the average innovative firm in our sample.

Do financial constraints threat the innovation process? Evidence from Portuguese firms

“…On the other hand, the effects of public policy, and specifically subsidies, on R&D spending and innovation performance, have been given particular attention in recent years (e.g. Bloom et al, 2002;Almus and Czarnitzki, 2003;Aerts and Schmidt, 2008;Schneider and Veugelers, 2010). However, as far as we know, the role of public financial support to R&D investment and innovation (hereafter subsidies for simplicity purposes) in alleviating firms' financial constraints has never been analysed explicitly.…”

R&D policies for young SMEs: input and output effects

“…There is a widespread belief that innovation activities of young, small and medium-sized enterprises (SMEs) might constitute the main driver of technological change and future growth (Veugelers, 2008;Schneider and Veugelers, 2010;Czarnitzki and Delanote, 2013).…”

Are high-growth firms overrepresented in high-tech industries?

“…Many policies for promoting growth in general and among HGFs in particular are, in other words, strongly biased towards high-technology sectors, typically defined as industries with a high degree of R&D intensity (Eurostat 2012; see also Schneider and Veugelers 2010;Coad et al 2014a). As noted by Mason and Brown (2013: 214), "this clearly indicates that policy-makers view high-technology sectors as the main generators of potential HGFs".…”