The effect of innovation vouchers on science-industry interaction

1. The effect of innovation vouchers on science-industry interaction Marc Van der Steeg Maarten Cornet Björn Vroomen CPB Netherlands Bureau for Economic Policy Analysis The Hague, The Netherlands m.w.van.der.steeg@cpb.nl

2. Outline • The evaluation problem in innovation policy • The innovation voucher • Research question and data • Analysis • Current research • Conclusions • Discussion

3. The evaluation problem • A two-way relation • causal: from policy to innovation • correlation: from innovation to policy • How to disentangle these two relations? • add covariates to the regression equation • do highbrow econometrics • or... • Controlled experiment • experimental group and control group • random allocation • difference is causal impact

4. The innovation voucher • Goal: • introduce SMEs to public research institutes • [market-oriented incentives for research institutes] • Characteristics • credit note, value max EUR 7,500, non-transferable • application-oriented research question • placed with a defined group of institutes • SMEs only • valid for 7 months • no restrictions on e.g. level of question or technology • 100 vouchers available; lottery if demand > supply

5. Research question • What is the effect of the innovation voucher on the commissioning of projects to public knowledge institutes? • number • size/value • account for timing effect • Beyond the scope of the paper • “John Henry effect”: effect on losers • persistence effect (current research) • effect on innovation output (current research)

6. Data (1) • 1,044 applications on September 17th, 2004 • Lottery: 100 winners, 944 losers • Telephone interviews during May, 2005 • 100 winners • 500 randomly selected losers • questions about actual behaviour • questions about counterfactual behaviour • Response rate • 71 winners (71%) • 242 losers (48%)

7. Data (2) • No significant differences between winners and losers in background characteristics (size, region, sector) • Before voucher scheme….. • 85% ever had contact with a public knowledge institute • 55% ever commissioned a project to a public knowledge institute • Reasons for never having commissioned an assignment: • no research question (15%) • a research question, but... • too expensive (42%) • research conducted in-house (16%) • other priorities (14%) • research institution or contact person unknown (7%) • usually commissioned to private organisations (2%)

8. Data (3) • Type of research questions voucher winners: • 60% product-related vs. 40% proces-related • 80% technological vs. 20% non-technological • 90% applied vs. 10% fundamental

9. Analysis (1): effect on number • Data • 62 out of 71 (= 87%) winners commissioned a project • 20 out of 242 (= 8%) losers commissioned a project • Effect • 13% of the vouchers not used (= (71-62)/71) • 8% crowding out (= 20/242) • 79% impact (= 62/71 - 20/242) • standard errors are small • Counterfactual behaviour • 76% winners say: without voucher, fewer projects • 86% losers say: with voucher, more projects

10. Analysis (2): effect on size • Actual behaviour: • for most winners: size project = voucher value • almost no data for losers • Counterfactual behaviour: • 81% of winners and 60% of losers say: voucher does not affect size project • difficult to interpret, but no indications for a large size effect • Voucher value seems focal point • follow-up project instead of larger project?

11. Analysis (3): timing effect • Few projects outside voucher period • 11% of winners say: without voucher same number of projects, but later • This indicates a limited timing effect • maybe one out of eight additional projects

12. Current research (1) • Same set of winners and losers • new questionnaire in September 2006 • Effect on innovation (output additionality) • 2 years after lottery: reasonable? • Community Innovation Survey “yes/no questions” • ongoing and realised innovations • new or significantly improved products/processes • Persistence (behavioural additionality) • number of follow-up projects • size of follow-up projects

13. Current research (2) • Two lotteries in 2005 • March: 1900 applications for 300 vouchers • September: 1400 applications for 450 vouchers • Effect on number of projects (input additionality) • Exactly the same questions as for 2004 lottery

14. Conclusions • Random allocation of innovation policy feasible • political and legal objections can be overcome • lottery if demand > supply and no further selection information available • Convincing evidence, easy to communicate • Input additionality: eight out of ten vouchers • limited timing effect • Crowding out: one out of ten vouchers • Current research • into output and persistence effect for 2004 voucher • into input effect for two voucher lotteries in 2005