Can Fast Growing R&D-Intensive Smes Affect the Economic Structure of the Eu Economy?: A Projection to the Year 2020

Abstract

The paper investigates how would sector composition and the magnitude of R&D investments in the EU differ in year 2020 compared to the past, if a selection of top R&D-investing SMEs were assumed to be on a fast growth track while the top R&D-investing large scale companies continued to grow as before. 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 from it an unbalanced panel. Scenarios were developed by distinguishing SMEs’ assumed growth paths vs. that of large scale companies. A linear prediction model has been used to compute the simulation. 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 rather medium-tech sectors towards a high-tech based economy, it requires either a significant longer time horizon of the assumed fast growth track than the simulated 10 years, or small firms’ growth figures which even exceed the assumed 30% annually (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.