Recent Research: Innovation vouchers found to increase SME patenting, other positive impacts

A working paper from the Innovation Growth Lab (IGL) series featuring researchers from the Max Planck Institute for Innovation and Competition provides causal evidence on the effectiveness of innovation vouchers and adds to the argument for implementing small-scale government funding mechanisms like innovation vouchers. Innovation vouchers are designed to link small and medium-sized enterprises (SMEs) with external knowledge resources to promote small-scale innovations.

Marco Kleine, Jonas Heite, and Laura Rosendahl Huber conducted a large-scale randomized control trial on a cross-industrial innovation voucher program established by Innovate UK that included all SMEs in the United Kingdom. The treatment group in the study consisted of 1,107 SMEs that received an innovation voucher up to £5,000 (approximately $6,950 US) to conduct an innovation-related project in collaboration with an outside expert or partner of their choosing. Kleine et al. then conducted two surveys on the treatment and control group. The first survey was conducted one year after the award of the voucher and the second survey was conducted two years after the award.

According to the researchers, the innovation voucher program had a positive short term effect on establishing innovation collaborations and significantly improved SMEs’ products and services. The researchers also found that firms that applied for intellectual property (IP)-related projects with an innovation voucher are estimated to have almost four times more patent applications in the first year than firms without a voucher. Given the short time frame of the study, the authors note that they were unable to comment on some of the wider effects of innovation vouchers such as the types of innovations that are developed or on any significant effects on business outcomes.

The researchers used data provided by Innovate UK to analyze the success of innovation vouchers along three outcome measures specific to the program. The first outcome measure studied was the positive effect on short term external collaboration. Second, the researchers analyzed the number of minimum viable products (MVPs), the number of new products and services, and the number of new patents, design rights, and trademark applications. This was done to measure the innovation outcomes at the project level. Third, the authors measured the potential impact of the innovation voucher at the company level by analyzing business outcomes such as turnover, profit, and the number of employees. 

Overall, the researchers argue that their results provide causal evidence on the effectiveness of innovation vouchers. Their results do not comment on the long-term collaborative relationships between SMEs and other organizations, but rather contribute to a short-term positive impact on the amount of collaborations and a medium-term impact on MVPs and increased products and services offered by the SME. However, previous studies including research by Theo Roelandt and Henry van der Wiel have shown that, in the Netherlands, innovation vouchers and other small policy interventions can positively structurally change a firm’s behavior and innovation performance. In particular, they found that innovation vouchers contributed to higher business survival rates, increased use of the labor-based R&D tax credit, higher level of R&D activities, and companies offering more employment opportunities.