Companies’ growth in the EU: What is research and innovation policy’s role?

This document presents a literature review on the economics of research, innovation and competitiveness, focusing on the evidence available regarding the determinants for company creation and growth and the role played by Research, Development (R&D) and innovation. Furthermore, based on this, it draws a number of policy implications to design future research and innovation support instruments targeting innovative company growth in Europe. The result of this work indicates that: a) EU needs support policies to foster R&D investment in some specific typology of innovative companies and only where there are market failures and clear high social returns; b) the establishment of any targeted support instruments should take into account an integrated set of criteria including: firms' age and size, the sectors where firms operate, the involved risks in and potential for their innovative and commercial activities, the country/techno-economic environment, and the degree of internationalisation; c) to be successful, no matter the new targeted policies and supporting instruments, they should be designed using policy experimentation and its results should be regularly measured and evaluated using appropriate indicators and analyses.JRC.J.2-Knowledge for Growt

La inversión en I+D del sector privado en la UE y en otros países: un análisis comparativo basado en una clasificación del 2004 de la Comisión Europea

Este artículo presenta los principales resultados del primer “EU Industrial R&D Investment Scoreboard”, que muestra las primeras 500 compañías pertenecientes a la Unión Europea (UE) y las primeras 500 compañías no pertenecientes a la UE según su inversión en I+D. Después de una corta explicación de la definición y objetivos de este ejercicio, su contenido y sus principales conclusiones vienen junto con los resultados de otros análisis realizados dentro de La Comisión Europea, Dirección General, Centro Común de Investigación (CCI) Sevilla, mostrando la importancia del grado de concentración a nivel de compañía para la situación industrial de la I+D en general. Parece que hay una correlación entre la intensidad del crecimiento de I+D y el crecimiento de las ventas (netas) de las empresas. A pesar de una impresionante cantidad de inversión en I+D, la media general de la inversión en I+D de la muestra perteneciente a la UE es mucho menor que la de sus equivalentes. Esto está relacionado a una proporción menor de producción procedente de sectores con intensidad en I+D intrínseca alta, lo que se puede observar especialmente en compañías especializadas en IT hardware y también en servicios de software y para ordenadores. A pesar de que las cantidades de inversión en I+D son comparables para las grandes empresas, la proporción para empresas que están en medio y al final de la lista de “top-500 Scoreboard” es mucho menor en la UE que fuera de ella. Este análisis indica que los modelos y estructuras nacionales, regionales y sectoriales se desvían considerablemente de los de la media europea. Una sección entera del artículo esta dedicada a la comparación entre sectores de los indicadores de I+D. El problema de la concentración de la inversión en I+D entre compañías muy importantes que invierten en I+D viene investigada en mayor detalle, entre las empresas grandes, según el sector de actividad y según la localización. También se ha demostrado que la muestra de las compañías inversoras en I+D más importantes se puede caracterizar estadísticamente por heterocedasticidad. ____________________________________________This paper presents the main results from the 2004 EU Industrial R&D Investment Scoreboard, which lists the top 500 EU companies and the top 500 non-EU companies ranked by their R&D investment. After a short description of the definitions and objectives of the exercise, its content and main findings are shown together with results from other analyses performed within The European Common Directorate General, Joint Research (JRC) – Seville, showing the impact of the degree of concentration at the company’s level on the overall industrial R&D stance. There seems to be a correlation between R&D intensity growth and net sales growth. Despite a competitive total amount of R&D investment, the average overall R&D intensity of the sampled European Union companies is much smaller than for their non-EU counterparts. This is related to a smaller proportion of output from sectors with high intrinsic R&D intensity, which is particularly noticeable in IT Hardware and Software and Computer Services. Although R&D investment amounts are comparable for the biggest firms, the share of R&D performers at the middle and the bottom of the EU-500 Scoreboard is much smaller in the EU than in the non-EU. The analysis indicates that national, regional and sectoral patterns deviate considerably from the overall picture of the EU. An entire section of the paper is dedicated to an inter-sector comparison of R&D-related indicators. The issue of concentration of R&D investment among top companies investing in research is investigated in more detail, in large companies, by sector of activity and by location. It is also proved that the sample of top R&D investing companies is statistically characterised by heteroscedasticity

Projection of R&D-intensive enterprises' growth to the year 2020: Implications for EU policy?

The paper investigates how sector composition and the magnitude of R&D investment in the EU may differ in 2020 in comparison to the past, if a selection of top R&D-investing SMEs were as-sumed to be on a fast growth track while the top R&D-investing large-scale companies continue to grow as before. The background of this research objective is the emerging focus on SMEs – and in particular the fast-growing among them – with regard to the "Europe 2020" policy strategy. The study relies on the sample of top R&D-investing firms as given by the latest available "EU Industrial R&D Investment Scoreboard" editions, building there from an unbalanced panel. Scenarios were developed by distinguishing SMEs' assumed growth paths vs. that of large scale companies. A lin-ear prediction model has been used to calculate the scenario simulations. Overall, the study indicates that if one expects the (R&D-intensive) small firms to be a driving force for a substantial structural change in the EU economy, from being driven by medium-tech sectors towards a high-tech based economy, it requires either a significant longer-term horizon of the assumed fast growth track than the simulated 10 years, or small firms' growth figures which even exceed the assumed annual 30% (as in the most optimistic scenario). Neither case appears to be particularly realistic. Hence, we need more top R&D investors in Europe to further intensify their engagement in R&D (increasing volume and R&D intensity) as well as numerous small firms that start and/or significantly increase their existing R&D activities and thus seek to become large firms and (global) leading R&D investors. Accordingly, a broad R&D and innovation (policy) strategy is needed with policy interventions which also target well all these options; i.e. stimulating firm growth and R&D and innovation-intensity across firm-sized classes.JRC.J.2-Knowledge for Growt

The effect of innovative SMEs' growth to the structural renewal of the EU economy - A projection to the year 2020 -

The Policy Brief addresses the following question: To what extent the high-growth of current innovative R&D-intensive SMEs can drive the envisaged structural change of the EU economy towards high R&D intensive sectors? It aims to contribute to the debate about how to set the right priorities and find the most appropriate policy interventions to allow Europe to reach the 3% R&D intensity target and hence its growth and employment objectives. It first summarises stylised findings from the literature on the relevance of innovative companies for economic growth, then presents results from a recent JRC-IPTS study which go some way towards answering the question posed above, and concludes by outlining some of the contributions that enrich the policy debate.JRC.J.2-Knowledge for Growt

Does size or age of innovative firms affect their growth persistence? Evidence from a panel of innovative Spanish firms

This study examines serial correlation in employment, sales and innovative sales growth rates in a balanced panel of 3,300 Spanish firms over the years 2002-2009, obtained by matching different waves of the Spanish Encuesta sobre Innovacion en las Empresas, the Spanish innovation survey conducted annually by the Spanish National Statistics Institute (INE). The main objective is to verify whether the changes (increase/decrease) in these figures are persistent over time, whether such persistence (if any) differs between SMEs and larger firms, and if it is affected by a firm's age. To do so, we adopted a semi-parametric quantile regression approach. This methodology is well suited to cases where outliers (high-growth firms) are the subject of investigation and/or when they have to be assumed as being very heterogeneous. Empirical results indicate that among those innovative firms experiencing high employment growth, the smaller and younger grow faster than larger firms, but the jobs they create are not persistent over time. However, while being smaller and younger helps growing more in terms of employment and sales, it is not an advantage when innovative sales growth is considered: in this case larger firms experience faster growth.JRC.J.2 - Knowledge for Growt

EU corporate R&D intensity gap: Structural features calls for a better understanding of industrial dynamics

Corporate Research and Development (R&D) is a driver for innovation, competitiveness and job creation. However, trends do not suggest the achievement of the EU-policy 3% target in R&D intensity. To succeed, the EU would need an industrial structural and demographic change via business creation and transformation and its sustained R&D-led growth.JRC.B.3 - Territorial Developmen

The 2007 EU Industrial R&D Investment Scoreboard

This report presents the results of the 2007 edition of the "EU Industrial R&D Investment Scoreboard" (Scoreboard). It provides information on the 1000 EU companies and 1000 non-EU companies investing the largest sums in R&D. The Scoreboard includes R&D figures along with other economic and financial data from the last four financial years. The report includes a discussion on the key figures of the world¿s top R&D investors. It examines overall levels of R&D, the performance of the EU companies, and the main changes that took place last year. The performance of individual companies among the top R&D investors, in particular those undergoing significant R&D growth is outlined. Moreover, an overview of the company data aggregated by industrial sectors and world regions, with comparisons between the EU companies and their main competitors is included.JRC.J.3-Knowledge for Growt

Financing R&D and Innovation for Corporate Growth: What new evidence should policy-makers know?

The Policy Brief addresses the results of a recent European Conference on the Financing R&D and Innovation (CONCORDi-2013: http://iri.jrc.ec.europa.eu/concord/2013/index.html). It presents recent empirical evidence on the topic and attempts to draw a number of policy-relevant messages to be brought to the attention of policymakers, as well as open questions requiring further research to address policy needs. This document provides state-of-the-art evidence and the most recent value-added results, summarised as follows: a) Financial constraints are important obstacles to R&D and innovation in EU firms, and the importance of these obstacles depend on factors that are both internal and external to firms. b) The reduction of information asymmetries can considerably lower the barriers to access financial resources for corporate R&D and innovation activities. c) Among external financial instruments, bank loans are the least attractive, while venture capital is (still) considered suitable for financing R&D and innovation projects, although they have a too short a time horizon to yield returns. Crowdfunding has been identified as a new emerging financial instrument. d) Policy remedies to financial shortages and barriers are not affected by crowding-out, but their additionality is very sensitive and not yet systematic. Public venture capital and public use of crowdfunding are issues to be further investigated. e) The great heterogeneity of companies and framework conditions across countries and regions calls for better analyses and monitoring of instruments. f) Both scientists and policymakers participating to CONCORDi-2013 called for establishing a stronger network of R&D and innovation policy evaluators to support the proper implementation of the upcoming European financial support instruments agreed for the period 2014-2020.JRC.J.2-Knowledge for Growt

The EU vs US corporate R&D intensity gap: Investigating key sectors and firms

This paper contributes to the literature on corporate research and development (R&D) intensity decomposition by examining the effects of several parameters on R&D intensity. It draws on a longitudinal company-level micro-dataset, built using four editions of the EU R&D Scoreboard, and confirms the structural nature of the EU R&D intensity gap with the US, which has widened in the last decade. As a novel contribution to the literature, this paper uncovers the differences between the EU and the US by inspecting which sectors and firms are more accountable for the aggregate R&D intensity performance of these two economies. Furthermore, the study shows that a large share of R&D investment by the EU sample is mostly conducted in sectors with medium or low R&D intensity, and that there is a high concentration of R&D in a few sectors and firms. Interestingly, the investigation finds a high heterogeneity in firms' R&D intensity within sectors, indicating the coexistence of firms with different R&D investment strategies and efficiencies. Finally, the study reveals that the EU holds a much lower number of both larger and smaller R&D investors than the USA, in the four high-tech sectors that are key to the aggregate EU R&D intensity gap vis-à-vis the USA.JRC.B.3 - Territorial Developmen

Where the EU stands vis-à-vis the USA and China? Corporate R&D intensity gap and structural change

This Brief explores the longstanding deficit in the EU’s overall corporate R&D intensity compared with that of competing economies over the last decade. The main results indicate the following: The EU business sector is still leading in traditional medium-tech sectors, such as automobiles and parts. As for the US and China, they are much stronger in newer high-tech sectors, and have maintained and even increased their strength in the last decade. For the EU, this causes a lower overall share of net sales and of R&D investment in sectors of high R&D intensity, compared with the full sample (all sectors). Consequently, there is a lower impact on the aggregate (all sectors) result for EU R&D intensity. The EU has a small number of global players in key sectors of high R&D intensity, such as biotechnology and ICT. The sample of top EU R&D investing companies is ahead in the production of green patents related to climate change technologies, as compared with the US and China. Tailored policies should also foster the speed of structural (sectoral) change towards sectors that are more R&D intensive, including some emerging ones, for example artificial intelligence and renewable energies. This will help the creation and growth of more firms in such sectors.JRC.B.7 - Knowledge for Finance, Innovation and Growt