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Assessing the impact of innovation policies: a comparison between the Netherlands and Italy
Elena Cefis and Rinaldo Evangelista(University of Bergamo, University of Camerino)
The impact of innovation on growth and employmentRome, June 23, 2008
Università di Roma "La Sapienza”, Facoltà di Economia
Under-investigated topic
• Lack of systematic and reliable data & evidence
• Little evidence on Italy and the Netherlands
• International literature focuses on the impact of public support to business R&D (“additionality” issue)
• No conclusive answers (David et al., 2000; Quevedo, 2004)
Need of broadening the evaluation of innovation policies
• Beyond R&D…
• Beyond technological input….
• Beyond short term effects
CIS indicators
Public support to innovation• Access to public support (yes/no)• Type of incentive (Regional/local, National, European, EU FP)
Innovation strategies and performances•Type of innovation, tech. input & outputs•Innovation expenditures (beyond R&D)• sources of knowledge and external linkages• objectives pursued• obstacles to innovation
Economic performancesGrowth of sales/employmentExport propensityProductivity
CIS Data-sets used
Firm level (NL & IT):
2) CIS3 (all sample - manufacturing)
3) Longitudinal CIS2-CIS3(sub-sample of manuf. firms selected in both surveys)
1) CIS4: descriptive – aggregated figures
Issues addressed
1. What kind of “innovation policy models” are in place in Italy and the Netherlands? (mission vs diffuision; Ergas 1987; Cantner et al., 2001)
- How many (innovating) firms do get a fianancial support?
- What is the innovation profile of the firms receiving financial support?
2. What are the effects of innovation policies?
In particular on:
the resources devoted to innovationthe innovation outputthe innovative behaviours of firms
Are there additional effects?
The weaknesses of the Italian innovation system
• Specialization in medium and low-tech
industries
• Dominant role of SMEs
• Low percentage of innovating firms
• Little R&D
• Dominant role played by process innovation
The Dutch innovation system
• Specialization in medium and high-tech
industries
• Dominant role played by large firms (MNCs)
• High percentage of innovating firms
• Medium/High level of R&D
• Dominant role played by product innovations
Innovating firms receiving public financial supportCIS4: 2002-2004 (% of innovating firms)
Total economy
Manufact. Services
Italy 0.39 0.44 0.24Netherlands 0.38 0.49 0.26
Norway 0.44 0.55 0.34Finland 0.35 0.46 :
Germany 0.14 0.18 :France 0.20 0.26 0.11Denmark 0.15 0.22 0.08Belgium 0.23 0.29 0.14
Spain 0.26 0.28 0.19Greece 0.29 0.32Portugal 0.11 0.13 0.08
Source: Eurostat
Innovating firms receiving public financial support by administrative source of funding. CIS4: 2002-2004 (% of innovating firms)
Italy NL
EU 0.04 0.07
EU IV & V FP 0.01 0.02
Regional/local 0.29 >> 0.09
Central governament 0.17 << 0.43
Source: Eurostat
ManufacturingItaly NL
0.02 0.04
0.01 0.02
0.17 >> 0.05
0.09 << 0.22
Services
Innovating firms receiving public financial support
Manufacturing, 1998-2000 (% of innovating firms)
10-19 26.9 37.9
20-49 41.1 49.0
50-249 56.6 50.4
250 or more 71.1 51.6
Total Manufacturing 49.9 43.9
Firm size (No of employees)
NL IT
Source: Italian and Dutch Statistical Offices
Innovating firms receiving public financial support by type of innovation strategy CIS3: 1998-2000 (% of innovating firms)
Product Process
Innovating firms receiving public financial support
45.7 >> 22.1
from regional/local administr. 3.5 >> 2.4
from central governament 42.1 >> 18.3
from the EU 6.1 >> 2.9
from IV and V EU FP 3.3 >> 1.9
NETHERLANDS
Source: Italian and Dutch Statistical Offices
Type of innovation introduced
Product Process
38.8 << 46.8
22.4 << 26.9
15.5 << 20.5
6.9 6.0
2.3 0.9
ITALY
Type of innovation introduced
CIS indicators used in the econometric firm-level analysis
Presence of a public financial support (independent variable)• Access to different types of public funds (regional, national, EU) (binary yes/no)
Innovation performances (dependent variables)• innovation expenditure per employee (INPUT)• sales related to new products (new to the firm/market) (%) (OUTPUT)• technological linkages (importance)
Innovation strategy/profile (control factors)• product/process innovation•presence of intra-mural R&D• Firm size• Sector
Weaknesses of CIS data
•No possibility of identifying the exact timing of:- the strategic decision to invest on innovation
-> the administrative approval of the funding -> the actual financial transfer
-> time span of the innovation process (lag bw tech. input and output)
•cross-section nature of the data ->endogeneity problem
•No quantitative figures on the amount of the financial support received by firms: we have just a binary (yes/no) variable
CIS Data-sets used (firm-level)
• CIS3 (1998-2000) – full samplevery short time-lag
bw the time firms get the incentives and the time when we observe/measure the innovation performances
what do we estimate with these data?
-> short term effects (although with severe endogeneity problems)
-> innovative performance of the firms receiving public support
• CIS2-CIS3: longitudinal data-set (sub-sample)- 4 years time lag (more realistic…)
- Measurement of the impact in terms of rates of change of innovation
performance indicators (1996->2000)
- > more reliable indications on the presence of “additional effects”
The impact of innovation policies (1998-2000)OLS estimates (without time lag) Dependent variables (2000) % turnover % turnover
due to due to productsnew products new to the market
Indp. variables (1998-2000) B Sig. B Sig. B Sig.
Presence of public financial support
Innovationexpendituresper employee
From local sources 9.019 ** 0.058 *** 0.027 ***
from central.gov sources 8.507 *** 0.037 *** 0.009 **
from EU 7.370 -0.021 -0.007
from EU FP 21.530 *** 0.097 *** 0.060 ***
NL
From local sources 1.560 ** 0.017 * 0.018
from central.gov sources 2.857 *** 0.002 0.002
from EU 1.255 -0.003 -0.011
from EU FP 2.987 ** 0.050 ** 0.039 *
IT
The impact of innovation policies on firms'innovation performances OLS estimates (with time lag -CIS2/CIS3) Dependent variables (2000) % turnover % turnover
due to due to productsnew products new to the market
Indpendent variables (1996) B B B
IT Public financia support 2.833 * 0.024 -0.015
Product innovation 0.103 0.094 ** 0.095 ***
Process innovation 2.588 *** -0.018 0.028
Presence of intra-muros R&D 1.307 0.031 0.000
Intercept -5.544 -0.064 -0.035
No of observations 558 472 472Rsq corrected 0.03 0.11 0.07F. 1.68 ** 3.08 *** 2.23 ***
Innovation
per employeeexpenditures
NLPublic financia support 5.390 ** -0.038 0.004
Product innovation 1.223 0.057 * 0.010 ***Process innovation 2.036 0.004 -0.004Presence of intra-muros R&D 5.760 * 0.043 0.015
Intercept -3.006 0.135 ** 0.027
No of observations 591 591 591Rsq corrected 0.18 0.06 0.06F. 5.82 *** 2.45 *** 2.62 ***
The impact of innovation policies (1994-96) on firms innovation performances (1996-2000)
OLS estimates
Beta t Beta tDependent variables
Rate of change in 1996-2000 of:Innovation expenditures per employee -0.138 -0.673 -0.177 -0.08
Turnover due to new products 0.07 1.379 -0.069 -2.31
Turnover due products new to the market 0.062 1.015 -0.001 -0.06
ITALY NETHERLANDSIndep. Var.
Access to financial support
Indep. Var.
Access to financial support
Logit estimates ^ B Wald B Wald
Increased immportance (in 1996-2000) of:
Interactions with Universities 0.1584 0.516 -0.067 -0.28
Interactions with other R&D Inst. 0.236 1.152 -0.202 -0.86
Cooperation -0.090 0.0012 -0.278 0.99
ConclusionsBoth Italy and the Netherlands are characterized by a “diffusion oriented” innovation policy model (differences with most of the other EU countries)
Differences between the two systems:The Dutch model: - supports a rather stable group of (large) R&D performing firms- strong central Governance
The Italian Model: - strongly oriented to support SMEs and process- oriented innovation activities- Governance of the system (???): at least two levels (National/Regional) badly coordinated
Limited impact:
- more on the inputs than on outputs
- short term rather than long-term effects
- no/very limited additionality
Limited structural/long term effectiveness
- no effects on the long-terms behaviours and strategies of firms
- no up-grading of the overall innovation profile of the industrial system
Indications on the effects of innovation policy
What is the problem?Issues debated in Italy
• Timing and effectiveness of the evaluation & funding procedures
• Poor coordination between the different governance levels (regional/national/EU)
• Lack of serious/rigorous evaluation procedures (both ex-ante e ex-post)
Quality of “demand” (poor innovation profile of applying firms) –> vicious circle
•Low selectivity
•Types of policy tools/incentives (dominance of automatic mechanisms)