Author Archives: Margaret Pesuit

Quantifying Innovation and Access to Finance

– prepared by Michele Cincera and Anabela Santos, ULB, Solvay-iCite

Photo: Mark Bonica

Following the initial literature review and data collection, the “State of Implementation and Direct Impact Assessment” report regarding Innovation and Access to Finance aimed to explain the links between the targets of commitments 10 to 13[1] and their implementation in the NEMESIS model. For each commitment, the following questions were addressed: i) In which category can each commitment be classified, regarding their implementation in the NEMESIS model? ii) Which parts of the NEMESIS model can best describe each commitment’s mechanism and actions? iii) What is the rationale with regard to how each commitment can be integrated in the NEMESIS model? iv) What kind of commitment inputs will be provided to the SEURECO team?

All four commitments were classified as “selected” regarding their implementation in the NEMESIS model because they have precise objectives, they have a significant direct impact on the European innovation system, and data to quantify them is available (with some restrictions).

All four commitments are inserted in the “Finance” thematic in the NEMESIS model and the inputs to be provided to the SEURECO team are essentially data and elasticities of several econometric model estimations.

The ULB team foresees estimating at least nine econometric models in order to quantify the commitments’ rationale. The aims of each of them are the following:

  • C10 – What are the effects of RSFF on country R&D expenditures and jobs?
  • C10 – For what kind of firms is access to finance a pressing problem?
  • C10 – What factors influence the interest rate of a credit line?
  • C10 – Could access to finance influence R&D decisions, innovation and firm performance?
  • C11 – How can macroeconomic conditions affect the cross-border operation of venture capital funds?
  • C11 – What is the impact of cross-border venture capital funds on innovation, competitiveness and growth?
  • C12 – How can innovation capacity be affected by networks and collaboration across entities?
  • C12 – How can economic growth and productivity be affected by networks and collaboration across entities?
  • C13 – How can legal frameworks affect the effectiveness and efficiency of RDI state aid?

[1] Commitment 10 – Put in place EU level financial instruments to attract private finance; Commitment 11 – Ensure cross-border operation of venture capital funds; Commitment 12 – Strengthen cross-border matching of innovative firms with Investors; Commitment 13 – Review State Aid Framework for Research, Development and Innovation.

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The State of Implementation and Direct Impact Assessment: Smart Specialisation Strategies

– prepared by Sandor Richter (WIIW), Berenike Ecker (ZSI), Marta Mackiewicz (WERI) and Hermine Vidovic (WIIW)

The allocation of ‘substantial financial resources’ (EU funds) to research and innovation and more efficient spending of these resources (Commitments 24/25) was achieved with the help of smart specialisation strategies (S3). The S3 internet platform has been online since 2012, and has become an important tool to help Member States and their regions develop S3 strategies. The future relevance of the platform will depend on its successful reframing as a platform for reviewing and evaluating S3 implementation. The costs of establishing and continuously operating the internet platform are justified, given the extent of its audience and the richness and usefulness of the services it offers. Its efficiency, based on an evaluation of its costs and benefits, has been judged as satisfactory.

The implementation of Commitment 26 is quite advanced. Challenges were presented to the creation of robust conclusions by the lack of data and the different dimensions of the initiatives. Concrete estimations were possible for the Social Innovation Platform (SIE) and the Social Innovation Europe Competitions. Estimations of the impact of the “Guide to Social Innovation” and the incubator projects BENISI and TRANSITION were more challenging, as indicators for the impact of these projects are not publicly available. Estimations of the impact of the “widely-dimensioned” initiatives (the Social Investment Package (SIP), the Employment and Social Innovation programme (EaSI) and the mainstreaming of social innovation in the ESF funding period 2014-2020) have been problematic. On the one hand, the necessary data is not currently available as the implementation of the programmes and measures has just started, on the other hand, very little knowledge is available with regard to the understanding of social innovation in the context of these initiatives.

The implementation of Commitment 27 is advanced, except for the pilot, European Public Sector Innovation Scoreboard (EPSIS), which was scheduled for publication in 2015. Due to insufficient data, this part of the Commitment may remain uncompleted. The majority of policy makers who responded to a survey carried out within the I3U project considered EPSIS useful for policy making and sharing best practices. They also link EPSIS with positive indirect effects, such as better evaluation; enhanced cooperation and the exchange of experiences between countries; positive competition; and motivation to change. Supporting a research programme on the public sector and social innovation resulted in new ways of collaborating and new publications. One positive effect is a high level of knowledge transfer within these projects and prospects for a sustainable partnership among institutions implementing them.

Concerning Commitment 28, though social partners commit themselves to innovation in general, a specific commitment to the implementation of the innovation union is missing in their work programmes. This was confirmed by the correspondence/interviews with social partners at the national level (Austria) and at the EU level, both with employers’ and employees’ representatives. One of the reasons for the delay in or even the non-implementation of Commitment 28 seems to be the high fragmentation of the social partners at the EU level, which complicates the decision-making process due to different sectoral interests. For this reason, an assessment of the impact of Commitment 28 on growth and employment is not possible at this stage. Given that its implementation is still in an early stage, its impact on the social partners’ involvement can be only measured in the medium term, if at all.

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Translating the Commitments into the NEMESIS Model

– prepared by Pierre Mohnen, UN-MERIT

An analysis of European innovation and of the 34 commitments, along with a discussion at the September project meeting in Zagreb, has led to a re-evaluation of whether and how all 34 commitments can be put into the NEMESIS model.

Certain commitments do not lend themselves to modelling within the NEMESIS model. There are a number of reasons for this: in some cases, their aim is to produce useful statistics to monitor the progress of the Innovation Union without a direct impact on innovation in particular sectors. In other cases, where implementation has not yet occurred or has been delayed, or where the data needed does not yet exist, it is not yet possible to quantify their effects on innovation and other measures of economic performance.

Some commitments will have direct effects on innovation and indirect ones on other measures of economic performance within the NEMESIS model, yet cannot be incorporated into the model at this stage. This is because the data is missing, flawed or incomplete, or because the parameters needed to quantify their impacts are too uncertain.

There are some commitments that can be put into the NEMESIS model. Specifically, these commitments are: human capital (especially skilled capital in R&D, ICT and other intangibles); financing that reduces the cost of capital and thereby encourages investment in R&D, ICT and other intangibles; ways to increase the diffusion of knowledge as another determinant of innovation; ways in which spillovers occur in the transmission of knowledge or in the transmission of rents from innovations that benefit other sectors that are generators of R&D; infrastructures that facilitate innovation; and public investment in the generation of knowledge.

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Papers, Conferences and Events

New and upcoming publications related to I3U

New working papers on the progress of the Innovation Union will be available over the coming months from Michele Cincera and Anabela Santos from ULB, Solvay-iCite.

The following papers will be published in May 2017:

In addition, the ULB researchers are preparing the following articles related to the I3U project:

  • Foreign Venture Capital investment: How could institutional and macroeconomic conditions influence cross-border operations?
  • Measuring financing risk of European innovative firms through interest rates (to be published as an iCite working paper in September)
  • How much is access to finance a pressing problem for innovative firms?
  • Assessing the additionality of innovation financing on firms’ growth dynamics: New evidence from European firms (to be published as an iCite working paper in September)

The team of researchers at WIIW have been working on a number of things as well. Specifically, a special issue of the WIIW Monthly Report with short contributions by Sandor Richter (WIIW), Berenike Ecker ZSI), Marta Mackiewicz (WERI) and Hermine Vidovic (WIIW) on the implementation and impact assessment of 4 commitments (Maximising Social and Territorial Cohesion; the European Social Innovation Pilot; the Public Sector Innovation Scoreboard and the Research Programme on Public Sector and Social Innovation; and Consulting Social Partners on the Interaction between the Knowledge Economy and the Labour Market) will be released in the 2nd quarter of 2017. Also, a joint WERI-WIIW-ZSI Research Report with a comprehensive analysis of these same commitments will be released in the third quarter of 2017. Moreover, there is an upcoming WIIW Research Report on innovation and convergence, looking at the impact of R&D investments on productivity, employment and growth by Roman Römisch (WIIW), as well as a WIIW Research Report on industry 4.0 by Hermine Vidovic (WIIW). Finally, a working paper entitled “The role of benchmarking in enhancing public sector innovation” is in the pipeline, and this may later be published in the World Economy Research Institute Working Papers.

Presenting I3U at conferences and events

Andrea Mervar of EIZ discussed the I3U project and initial experiences at the IRMO (Institute for Development and International Relations) Science Council Meeting in Zagreb on March 17, 2016.

At the 9th Conference on Model-Based Evidence on Innovation and Development (MEIDE), held on June 16-17, 2016 in Moscow, Russia, Pierre Le Mouël, Boris Le Hir, Arnaud Fougeyrollas, Paul Zagamé and Baptiste Boitier presented the I3U project and the NEMESIS model in their paper, Toward a macro-modelling of European Innovation Union: The contribution of the NEMESIS model.

Michele Cincera and Anabela Santos from ULB, Solvay-iCite presented the project at two conferences: The Master and Doctoral Consortium for Research on Public Policy at the Universidade de Évora (Portugal) on June 23-24, 2016; and Earie 2016 Industrial Economics at the Nova School of Business and Economics (Portugal), August 26-28, 2016.

In addition, they will present their published working paper, Access to finance as a pressing problem: Evidence from innovative European firms at the 7th ZEW Conference on the Economics of Innovation and Patenting.

Marzenna Anna Weresa of WERI-SGH spread the word about the I3U project at the finals of the KICkoff Competition 2016 (kic-kickoff.com) in Warsaw, Poland on September 20, 2016.

WIIW’s research results regarding the European Social Innovation Pilot have been inserted into the framework of the SI-DRIVE project, and these research results will be presented at future meetings/conferences. In addition, the impact assessment of the Public Sector Innovation Scoreboard and the Research Programme on Public Sector and Social Innovation will be presented at WERI at an internal seminar.

Upcoming conferences and events

Some upcoming conferences and events where information about the project could be disseminated are:

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The NEMESIS model and I3U presented in Russia

At the 9th Conference on Model-Based Evidence on Innovation and Development (MEIDE), held on June 16-17, 2016 in Moscow, Russia, Pierre Le Mouël, Boris Le Hir, Arnaud Fougeyrollas, Paul Zagamé and Baptiste Boitier presented the I3U project and the NEMESIS model in their paper, Toward a macro-modelling of European Innovation Union: The contribution of the NEMESIS model.

The paper presents the methodology adopted to represent innovation in NEMESIS, a Large Scale Multi-Sectoral model for EU-28 countries, widely used for the assessment of EU R&I policies. While the previous version of the model was based on R&D only, in this new version the range of innovation inputs was extended to investments in ICT and in a set of OI assets (Software and Training). It allows for the improved representation of innovation in service sectors and the diversity of the innovation strategies adopted by the different countries and production sectors. This new version of NEMESIS considerably enriches the range of R&I policies that can be assessed with the model, that is currently mobilized to achieve in-depth assessment of the European Innovation Union in the context of the I3U research project.

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