The use of SkatteFUNN, a tax deduction scheme for R&D in SMEs, to measure innovation capacities in SMEs.
There is a general belief that investment in research and development (R&D) is a key factor driving innovation and economic growth. A central challenge facing the public support system for industrial R&D in Norway - as in many other European countries -is to increase the level of R&D and innovation in the economy. Internal capacities in the companies, and particularly in SME's, are vital to increase the use of R&D in innovation processes.
The Innovation Strategy of Nordland County Council (NCC) has as one of its main goals to increase the use of R&D in the region. Specially to increase R&D-driven innovation in SME's. SkatteFUNN (a tax deduction scheme for R&D) was introduced in 2002 as a measure to increase R&D in the Norwegian private sector and has grown to become one of the most important policy instruments for this task.
The SkatteFUNN-project is in line with the MONITORIS3-project; "Strengthening the innovation capacities in businesses - stimulating collaborative R&D projects". In addition, the SkatteFUNN project delivers useful indicators for the monitoring and implementation of the RIS3 strategy in the area and is based on established methodology from the evaluations of the instrument. Altogether, this is in line with the MONITORIS3 main tasks to promote exchange of experiences in monitoring mechanisms, indicators and methodologies addressed to improvement in the delivery of policies and instruments in the framework of RIS3 across Regions.
To implement an instrument consisting of survey tool, data collection, analysis of results, reporting and dissemination will cost between 10 – 20 000€ depending on the level and size of the scheme and if internal or external human resources are used. Repetition of the study will lead to lower costs.
Evidence of success
Evaluations show good overall results of the scheme. In companies with little R&D experiences, it is shown that internal processes and competences are important to achieve the planned results. Many counties (as in Nordland) has set up programs to encourage SMEs to apply for support through increasing the internal capability to work with R&D projects and external R&D institutions. Competence brokerage has proven to be a valuable tool for improvement and change of innovation attitudes internally.
Evaluations of behavioral changes require a different approach than efficacy measurements. A behavioral approach to analyzing the effects of SkatteFUNN requires a mapping of qualitative attitudes + occurred changes from participating in the scheme. These inputs are necessary but difficult to obtain.
Potential for learning or transfer
The practice has a great potential for transfer between regions, since one of the first results of the project is a set of indicators helping to understand what is needed of internal capacity (resources, capabilities and strategies) for R&D and innovation in businesses. One main point in this regard is that public R&D interventions will have lengthy effects on R&D efforts first when recipient companies change their R&D behaviour and their innovation strategies. This knowledge-based information instrument can thus be used to get a better understanding in other regions of “how effects are created", one can improve public R&D initiatives and contribute to knowledge that can be of vital importance in raising the R&D level in businesses. This possibility for Increased effectiveness of public investments in R&D-programs can be of inspiration for other regions.