Small Business Economics

, Volume 41, Issue 1, pp 55–70 | Cite as

Effectiveness and efficiency of SME innovation policy

  • James Foreman-Peck


This paper assesses UK innovation policy impact on a large, population weighted, sample of both service and manufacturing SMEs. By focussing on self-reported innovation the study achieves a wider coverage of the effects of SME innovation policy than possible with more traditional indicators. Propensity score matching indicates that SMEs receiving UK state support for innovation were more likely to innovate than unsupported comparable enterprises. Innovating enterprises are shown to have grown significantly faster over the years 2002–2004 when other growth influences are appropriately controlled. Combining these two results and comparing the outlays on SME innovation policy with the estimated effects suggests that policy was efficient as well as effective. There is evidence that SME tax credits were expensive compared with earlier support instruments. But the overall high returns estimated suggest that, even in times of public spending cuts, persisting with SME innovation policy would be prudent.


Innovation State aid SME Policy evaluation 

JEL Classifications

L25 L26 R38 



Thanks to Peng Zhou and Tom Nicholls for excellent research assistance and to anonymous referees for their comments on an earlier draft.


This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen’s Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates.

Supplementary material

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Supplementary material 1 (DOCX 47 kb)


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Copyright information

© Springer Science+Business Media, LLC. 2012

Authors and Affiliations

  1. 1.Cardiff Business SchoolCardiff UniversityCardiffUK

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