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Innovation Capacity Building in SMEs (InnoCAP)

Periodic Reporting for period 1 - InnoCAP (Innovation Capacity Building in SMEs (InnoCAP))

Reporting period: 2019-08-01 to 2021-01-31

It has long been recognized that a wide range of barriers leads to the fact that small-to-medium-sized enterprises (SMEs) make suboptimal use of external advice and information. They are often slow to adopt proven technologies and business practices.
On the other hand, there is evidence that SMEs, due to their agility and lean decision-making processes and problem-solving skills, are more likely to develop new and innovative products and services. A study on behalf of FFG (2015) analyzed problems and barriers of SMEs in carrying out innovation activities. Besides financial barriers, a lack of understanding the importance of iteration, early user involvement and a lack of know-how about methods to manage and sustain innovation, was identified for Austrian SMEs. This report resulted in the program “Impact Innovation”, that funds Start Ups and SMEs utilizing innovation methods, iterating their products and/or services and involving their users during development. The funding of these projects mainly addresses financial barriers, however most applicants still present an immature methodological approach and half of them present a clear deficit in innovation know-how. Therefore, one may conclude that further support for SMEs to build up their innovation capacities and support their innovation actions is needed. However, whilst the rationale for intervention is widely accepted and numerous support schemes on national and European level have been implemented to support innovation activities in SMEs, there is very limited evidence on whether public support for building innovation capacities actually deliver positive benefits and what forms of support are most effective. For these reasons, it is the objective of this action to conduct a large-scale randomised control trial (RCT) to test if scalable support measures can increase the innovation capacity in SMEs in order to gain evidence on the effectiveness of the support measures in fostering innovation capacity in SMEs.
The work performed in the first reporting period encompasses the finalisation and implementation of an RCT, as well as adapting to early on indications of a mismatch between intervention and sample. The Action began with an intensive design finalisation phase in which the research design was finalised and translated into an actionable plan. Additionally, a monitoring plan was set up to measure the success of the RCT throughout its execution. Once this was finished, we transitioned into the actual implementation of an RCT. In short, the final research design is a randomized, double-blind, two-arm trial focused on testing the impact of a bundle of two digital tools on improving innovation projects funded under FFG’s funding program Impact Innovation. Naturally, the sample comprised firms receiving funding from Impact Innovation, who are randomized into either the control group or the treatment group. The intervention, which only the treatment group receives, consisted of an innovation management software and access to an online mentoring platform. The trial has been designed to take place over the course of 2 years, admitting firms periodically into the sample in line with the funding decisions for Impact Innovation, thus our trial has a unique “trickle sample”. The main outcomes being measured are the impact of the intervention on success of project implementation which is evaluated by the project evaluators at FFG.

First results of the RCT indicate that the combination of digital tools is unsuccessful in fostering innovation in SMEs due to the lack of willingness of SMEs to integrate the tools into their project plan. There is evidence, however, that suggests a more interactive intervention would be more successful in addressing this lack of know-how. In response to these findings, the intervention will be changed and the RCT adapted, accordingly, to account for these results and to investigate the efficacy of a different support measures.
Whereas, it cannot be said if the measures being tested will definitely have positive impacts on SMEs, the RCT will provide evidence of the efficacy of those support measures on fostering innovation in SMEs. These evidence-based results can be used to inform innovation policy and potential policy instruments on an organizational, national, and international level - which means both promoting a new policy based on positive results and not rolling out a policy based on negative results. Either way, it ensures that the future support measures offered from public innovation agencies are both a good use of public money as well as only positively impact SMEs.
A graphic depicting the basic reserach design structure