Business support schemes:
Grants for Private Sector Research and Development (GPSRD) Scheme Evaluations

Evaluation of GPSRD Scheme, Tony Hadfield, 2002; 2003 review; An evaluation of Grants for Private Sector Research and Development? (GPSRD) Outcome Management Services, 2004.

Scope:

Analysis of data provided by firms in their GPSRD Final Reports, combined with results from a questionnaire put to 20 randomly selected firms. The evaluations examined two basic questions related to the core objectives:

• Was GPSRD actually targeting “technologically aware” firms?
• Was GPSRD promoting a commitment to increased R&D expenditure? (2002).

352 completed projects analysed (2003 update).

A brief analysis of trends impacting the GPSRD scheme (2004).

Summary:

2002
Technological awareness

GPSRD had difficulty in targeting “technologically aware” firms because there was no clear definition of technological awareness or capability within firms. Evidence showed that technologically capable firms had accessed GPSRD. [This conclusion was also reported in a 2001 desk study].

Only 20% of firms interviewed had a formal technology plan of 3 years or greater duration. A significant number of firms had already accessed TBG?. The level of technological stretch in the projects appeared low, however, a number of the companies would have been capable of moving on to TBG.

Impact on R&D

Only 35% of firms interviewed used the funding to take on greater R&D risk. Firms indicated that funding had a significant (positive) impact on their R&D programme. Increased collaborations, good rating for R&D capability, high confidence in benefits of R&D indicated candidates for TBG emerging from GPSRD.

GPSRD was able to facilitate R&D for several small projects within one application which was seen as a benefit by firms.

Total reported R&D spend for the GPSRD year was more than 20% higher than was projected 12 months earlier at the time of application. A significant number of firms reported an intention to decrease R&D spending after GPSRD.

It was too early to predict if GPSRD funding would result in increased commitment to R&D, although there were contra-indications concerning the level of technical challenge being undertaken and R&D spending predictions over the short/medium term.

Other findings

There was evidence that a few firms had benefited simply from exposure to the GPSRD process in terms of establishing project management systems.

Demand for funds outstripped supply in GPSRD.

There were encouraging signs of potential export growth.

GPSRD had funded a substantial number of successful projects, most were short term.

GPSRD projects were associated with increased collaboration between firms.

2003 Update

GPSRD funded activities were near to market and commercial success rate was reported as high.

Most of the firms supported had confidence in achieving benefits from R&D.

GPSRD supported a diverse range of companies.

GPSRD had a variable impact on company R&D investment intentions over the short term.

2004

The size of the firms receiving GPSRD was generally small ($300k/annum) with a few larger sized firms ($30m).

Most firms claimed GPSRD was instrumental in growing sales by 7%+, although 150 firms reported no growth or a contraction in the market.

Approximately 10% of grants were “second time round” applications. The reported sales growth for these firms was on average greater than “first time round” applicants (12% as opposed to 9%).

Impact on R&D

Most GPSRD recipients did very little R&D, with the grant recipient having no budget for R&D at the time they received the grant.

The overall trend showed a decline in R&D spending following GPSRD. While R&D capacity had declined, growth in sales due to R&D had remained stable at 6%, however the R&D input required to achieve it was approaching 25% of total sales.

Anecdotal evidence showed that R&D for small firms was a cyclical process of 2-3 years rotation and that when a new product came to the end of its life, the cycle was repeated. This may be indicative that the scheme was not developing a sustainable growth in R&D.

The size of R&D being undertaken by firms was highly variable which was indicative of the nature of R&D activity in the type of firm being targeted.

Changes in the scheme from 2002-2004

GPSRD had been stable over time in terms of the grants allocated and the size of the firm targeted. From 2002 to 2004 the following changes had been noted in the GPSRD scheme:

• Firms receiving GPSRD were getting smaller.
• R&D effort within these smaller firms was declining in $ and % terms.
• Grant significance to a firm was increasing.

These factors were consistent with the scheme maturing.

Conclusions

Firms with strong R&D capability are likely to get the best value from R&D investment, but they do not require assistance to be involved with R&D. Investing in these firms will be at the expense of others who do require assistance to initiate R&D.

Firms with weak R&D capability are likely to be inefficient users of R&D funds. However, investing in these firms has the potential to significantly increase the scale and scope of R&D activity in the economy and to reach firms who have never benefited from this sort of assistance and who could make significant economic contributions if given the opportunity to do so.