twocircles

Government programs seldom involve top innovators. Typically, a very minor percentage of innovators benefit from government funding. Typically, the funding reaches instead more established players, which know how to play the “funding game”: the so-called usual suspects.

This is a common finding in the evaluation of most government funding programmes. For instance, our recent study on the FP7 impact on industry finds that only 5% of the fast-growing innovative SMEs participates in the programme – consistently with previous studies.

This is certainly a problem. We all want public money to go to the best projects, to the disruptive innovators, to the next Google, rather than to the incumbents or to the “industry” of professional project-writers that has emerged around public funding.

The cause seem to lie in a combination of administrative barriers to entry (complex procedures) with the lack of a strategic alignment between the priorities of government and of innovators.

Indeed, the capacity to involve the top innovators could become a success criterion for public policy. For instance, the European Research Council is widely respected, because of its ability to involve the top scientists in Europe. It is able to reward excellence. My understanding is that this is the aim of the forthcoming European Innovation Council: to do for innovation what the ERC has done for research.

In fact, the performance of different policies could be described through different Venn diagrams. Here is a sketch of the impression I have of two different instruments, the ERC and the Structural Funds (at least how they are used in Southern Italy based on my experience in evaluating Kublai).

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But in fact, the involvement of top innovators has never been formally defined as a success criteria or a KPI of public policy.

We know that KPI in public policy are particularly dangerous because they induce government to focus on getting the right numbers and play the metrics game, rather than addressing the real problems. We can easily imagine governments focussing on getting some high profile “unicorn” involved in their programs purely for communication reasons.

But the problem is more complex than that. We do not know if government programs should involve the top innovators in the first place. In the same study we note that according to some scholars, “the involvement of this “elite” could lead to a risk of reduced additionality by attracting firms that would have invested in innovation even in the absence of public support”.

Arguably, the appropriate KPI should be the percentage of unicorns/gazelles/scaleups involved that received public funding BEFORE they became successful.

But this is just a guess, as we don’t have much evidence behind it. After all, Google or Facebook didn’t get any government funding. We know that Defence funding and public procurement (e.g. DARPA) funds top innovators and generates disruptive innovation, but that’s a very specific context.

It could also be that government funding works best when it helps the moderate innovators that create a wider environment conducive for unicorns to emerge. Or perhaps, as a colleague pointed out to me, we should consider research funding just as we consider the Common Agricultural Policy, as a kind of subsidy that pays beneficiaries not for what they actually produce (innovations), but to maintain the environment (research activity).

What do you think?