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Good practices on innovation and R&D funding policies support

Good practices on innovation and R&D funding policies support. Ukraine Knowledge Economy Seminar Kiev, April 22nd, 2008 Peter Lindholm peter@lindholm-consult.com. Financing systems in the EU. Capital Access Index Measures how easily SMEs can get financing

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Good practices on innovation and R&D funding policies support

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  1. Good practices on innovation and R&D funding policies support Ukraine Knowledge Economy Seminar Kiev, April 22nd, 2008 Peter Lindholm peter@lindholm-consult.com

  2. Financing systems in the EU • Capital Access Index • Measures how easily SMEs can get financing • Here indicated as a deviation from EU average • Based on 56 indicators like: • macroeconomic policies • institutions • finance and banking • equity markets • bond markets • alternative sources of capital • international access • etc Source: Milken Institute, 2005

  3. Key roles of public authorities • Ensure fluidity of the risk capital market: • Support innovation and R&D investment in SMEs; • Identify SME real demand; • Improve the legal, administrative and fiscal environment to increase the flow of equity for early stage investment; • Provide investment readiness schemes to entrepreneurs. • Invest in public/private partnership to share risk in this market; • Raise awareness on a permanent basis

  4. Segmenting the market

  5. Targeted Policies and specific tools

  6. Three unavoidable building blocks • You cannot force companies to innovate if they are not hungry for it. Convincing them takes time and needs success stories • Financial tools must support a policy that is understandable by stakeholders (why, what, when) • The biggest problem in implementation often is the public sector itself

  7. Formulation Feasibility Development Launch Life Cycle Capital-risk Companies Capital Development Companies Personal Loans Seed capital Business Angels Self-financing OSEO Banking Competitions Research –Tax Credit Other forms of public help High Risk Low Source: OSEO (F) Policy fact sheet :National policy- France. Finance cycle

  8. Policy fact sheet :National policy- France. Finance cycle

  9. Policy fact sheet :Fiscal incentives – EU examples • In proportion to the level of the expenses • Immediate write-off or expensing • Tax credits proportional to the level of R&D • In proportion to the increment of R&D • Definition of the base (e.g. last two years) • Measures intended to remove ceilings in the effective use of tax incentives • Refundabilityof unused tax credits • Carry-back and carry forward of unused tax credits • Flow through mechanisms, i.e. transfer of unused tax credits to an eligible third party • Focus on specific types of R&D • Environment, health, defense, agriculture… • University, SME, regional support, R&D • Cooperation • Indirect tax incentives • Reduced corporate income taxes, exemption of capital gains taxes • Reduced taxes on dividends from venture capital funding • Reduced taxes for high-skilled immigrants EU examples: • Czech Republic : • The new tax regulation (2005) • to deduct expenses on R&D carried out for their own needs from their tax base • a major change in the Czech system which previously did not apply any indirect measures favouring R&D • Ireland : • The 2004 Finance Act introduced an R&D tax credit • 20 % tax credit against corporation tax • complement the various direct R&D grant supports also available through the various State agencies. 9

  10. Policy fact sheet :The Russian Venture Company - Russia

  11. Policy fact sheet :Greater London Enterprise - UK • Background : • London’s economic development company, Commercially and constitutionally independent • Tools: • GLE Development Capital; • One London Business Angels; • Factoring/Invoice Finance; • Small Business Loan; • Mentoring and Investment Readiness Programmes. • Application • €750,000-7,500,000 from GLE Development Capital; • €140,000-1,000,000 from One London Business Angels. • Good practices : • GLE also manages a £7 million loan fund that has provided finance to over 400 start up and early stage businesses • The group now supports approximately 6,500 small companies each year

  12. Policy fact sheet :Regional support policy- Rhône Alpes

  13. Policy fact sheet :Enterprise Ireland • Background : • 8 regional offices, Staff 950, Budget 2004 Euro 260m. • Tools: investment strategy • Ordinary Shares – High potential start-ups (HPSU) • Preference Shares (with conversion option) • Preference Shares – (Expansions/Developing companies) • Normally 5 year Term with low coupon rate • Redemption after 5 years • Application • EI will typically take up to 10% of the share capital; • Balance of funding in the form of grants and/or preference share – normally on a 50/50 basis; • Limits: • The level of EI funding determined by the potential level of exports and job creation; • Good practices : • Sectorally focused and regionally based

  14. Thank you for your attention !QUESTIONS ? For more information, contact : Peter LINDHOLM Lindholm-Consult peter.lindholm@wanadoo.fr Cell: 00336 143 150 13 Skype: p.lindholm1

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