Innovation voucher EFPL Sept. 30, 2006 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

Innovation voucher EFPL Sept. 30, 2006 Outline The evaluation problem in innovation policy The innovation voucher Research question and data Analysis Current research Conclusions Discussion

Innovation voucher EFPL Sept. 30, 2006 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

Innovation voucher EFPL Sept. 30, 2006 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

Innovation voucher EFPL Sept. 30, 2006 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)

Innovation voucher EFPL Sept. 30, 2006 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%)

Innovation voucher EFPL Sept. 30, 2006 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%)

Innovation voucher EFPL Sept. 30, 2006 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

Innovation voucher EFPL Sept. 30, 2006 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/ /242) ► standard errors are small Counterfactual behaviour ► 76% winners say: without voucher, fewer projects ► 86% losers say: with voucher, more projects

Innovation voucher EFPL Sept. 30, 2006 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?

Innovation voucher EFPL Sept. 30, 2006 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

Innovation voucher EFPL Sept. 30, 2006 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

Innovation voucher EFPL Sept. 30, 2006 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

Innovation voucher EFPL Sept. 30, 2006 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