Supply and demand side innovation policies : annexes of first policy brief.
Date: 2016-03-08
Institutions: Directorate-General for Research and Innovation
Subjects: EU research policy, Framework Programme for Research and Development, business policy, energy technology, innovation, research and development, small and medium-sized enterprises, supply and demand

Supply and Demand 
Side Innovation 
Policies 

Annexes of First policy brief

 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Directorate-General for Research and Innovation 
Directorate A— Policy Development and Coordination 
Unit A.4 — Analysis and monitoring of national research policies 

Contact: NIETO NUEZ Ana  

E-mail:  Ana.NIETO@ec.europa.eu 

RTD-PUBLICATIONS@ec.europa.eu 

European Commission 
B-1049 Brussels 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Supply and Demand Side 
Innovation Policies 

Annexes of First policy brief 

Prepared by: Inno AG, University of Manchester (MIOIR), INNOVA Europe, 
SQW Limited SQW. 

2015 

Directorate-General for Research and Innovation 
7th Framework Programme (FP7) 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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The report was prepared by the project team composed of Marc Pattinson and Sophie Vallet Chevillard (Inno-
Group), Dimitri Gagliardi, Chiara Marzocchi John Rigby, Yanchao Li and Deborah Cox (MIOIR),  Robin Brighton 
(SQW),  and  Gavriel  Avigdor  and  Rebecca  Lucas  (Innova).The  study  was  carried  out  on  behalf  of  unit  A4  
Analysis and monitoring of national research policies led by Román Arjona.  

Disclaimer 

This document is a report produced by the appointed research team and has been prepared as an input into the 

policy development debate.  The views expressed in this report, as well as the information included in it, do not 

necessarily  reflect  the  official  opinion  or  position  of  the  European  Commission  and  in  no  way  commit  the 

institution.  The  Commission  does  not  guarantee  the  accuracy  of  the  data  included  in  this  study.  Neither  the 

Commission nor any person acting on the Commission’s behalf may be held responsible for the use which may 

be made of the information contained therein. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEXE A.  LITERATURE REVIEW .......................................................................................... 6 

A.1 

Innovation Systems and Innovation Policy 

A.2  Demand side innovation policies: rationale and policies 

A.3  Supply side policies: rationale and policies 

A.4  Framework condition for innovation 

A.5 

Innovation Policy Mix 

6 

9 

12 

13 

13 

A.6 

Interaction between supply  and  demand:  linking demand side policies to supply side for an 
13 
integrated assessment 

A.7  Efficiency and effectiveness of the Innovation Policy Mix 

A.8  Drivers, barriers and challenges 

A.9  Selected Bibliography 

14 

15 

16 

ANNEXE B.  ILLUSTRATIVE LOGIC MODEL FOR INTERVENTION TO PROMOTE ESTABLISHMENT AND 
UPTAKE OF STANDARDS .................................................................................... 19 

ANNEXE C.  CASES STUDIES ............................................................................................... 22 

C.1.  Small Business Innovation Research (SBIR) 

22 

C.2.  German  (solar)  Panel  Policy  (Renewable  Energy  Heating  Act  and  Market  Incentive 
27 

Programme) 

C.3.  Smart Grid technology Standardisation 

C.4.  Health Information Technology for Economic and Clinical Health (HITECH) Act 

C.5.  Defence-related R&D procurement schemes 

C.6.  Procurement-conditioned SME R&D programme 

C.7.  New Technology Purchasing Assurance Programme 

C.8.  Pre-commercial Procurement by NHS, UK 

C.9.  Forward Commitment Procurement (FCP) 

C.10. Innovation Procurement Scheme by the Ministry of Defence 

C.11. Biometrics standardization UK 

C.12. Danish Program for User-driven Innovation 

C.13. SBIR in the Netherlands 

C.14. Small Business Research Initiative (SBRI) in the UK 

C.15. Top Sectors Initiative 

C.16. Green energy innovation funds 

C.17. Transformation of the  Greater Manchester Waste System 

C.18. European Innovation partnerships 

C.19. Lead Market Initiative (LMI) 

C.20. SME standardisation initiative 

31 

35 

38 

42 

44 

46 

49 

51 

53 

55 

58 

63 

66 

70 

74 

76 

80 

86 

 
 
Annexe A. 

Literature Review  

A.1  Innovation Systems and Innovation Policy 

In the past years there has been an increasing appreciation of how important innovation is to the 
economy so that Europe 2020 strategy puts forward Innovation at the top of its priorities:  

   Smart growth: developing an economy based on knowledge and innovation.  
   Sustainable  growth:  promoting  a  more  resource  efficient,  greener  and  more  competitive 

economy.  
Inclusive  growth:  fostering  a  high-employment  economy  delivering  social  and  territorial 
cohesion. 

Moreover, in the  Flagship  Initiatives, innovation figures as one of the main drivers of growth and 
job  creation.  In  particular  "Innovation  Union"  is  directed  at  improving  framework  conditions  and 
access  to  finance  for  research  and  innovation  so  that  the  knowledge  generation  process  can 
effectively  be  linked  to  market  applications  (to  ensure  that  innovative  ideas  can  be  turned  into 
products and services that create jobs and growth EC, 2010, page 5).  

The  innovation  process  varies  from  country  to  country,  sector  to  sector,  and  firm  to  firm. 
Innovation  studies  posit  increasing  awareness  of  the  significance  of  interconnectedness  between 
the  actors  involved  in  the  process  (e.g.,  Dosi,  1982).  The  importance  of  interactions  between 
participants of the innovation  process  also extends to include efforts to grasp the complexity and 
the iterative nature of these processes (e.g., Kline and Rosenberg, 1986).  

The figure below summarises the interactions between the stakeholders involved in the innovation 
process  highlighting  how  drivers  of  innovation  emerge  from  the  social  and  cultural  objectives 
expressed  by  the  system’s  components:  Citizens,  Government,  Firms  and  Universities  (and  other 
research organisations). In the same figure it also emerges that the same stakeholders are actively 
involved in the production of innovation. Their role within the systems can be understood as dual: 
they are both drivers and beneficiaries of innovation. 

The  main  message  that  also  emerges  refers  to  the  fact  that  any  policy1  attempting  to  promote 
engagement  between  innovation  drivers  involves  necessarily  multiple  actors.  This  is  because  the 
focus  of  the  analysis,  aiming  at  exploring  possible  synergies  and  conflicts  between  social  and 
cultural objectives and opportunities for innovation provided by accumulating knowledge, requires 
coordination as well as incentives and multidisciplinary knowledge.  

1  

Innovation  policy  is  often  justified  by  market  failure,  referring  to  the  disincentive  of  firms  to  invest 
optimally in innovation because private returns are suboptimal due to spillovers; recently system failure 
has  become  a  justification  for  policy  intervention.  System  failure  occurs  when,  within  the  system  of 
innovation, one or more elements do not perform to their potential or the links between elements might 
be missing or misaligned. A discussion of the market and system failure policy rationale can be found in 
Bleda  and  Del Rio,  (2013).  A  further  objective  of  policy  intervention  must  however  be considered:  the 
opportunity  of  higher  future  social  and  economic  returns  in  steering  the  economy,  or  part  of  the 
economy, towards different and more promising growth paths.  

 
 
  
                                                 
Figure 1 – who drives innovation? 

Source: Cox and Rigby (2013), page 11 

Major achievements of this debate have been the `system of innovation' approaches, advanced by 
Freeman  (1998),  Lundvall  (1992)  and  Nelson  (1993),  which  have  formed  the  basis  for  policy-
making  at  EU  level  and  amongst  a  wide  range  of  governments  across  the  developed  and  less 
developed  world.  Further  developments  include,  but  are  not  limited  to,  analyses  of  the  relation 
between  different  key  actors,  for  example  university-industry-government  (Etzkowitz  and 
Leydesdorff , 1998); the nature of governance and the role of scientific knowledge (Gibbons et al., 
1994; Nowotny et al., 2001).  

Drawing  on  the  premises  that  innovation  is  a  systemic  occurrence,  and  that  policy  is  intended to 
provide  remedies  for  market  failures,  support  or  avert  system  failures  or  fast-forward  the 
operations of an economic  system,  it  is  clear that  an appropriate policy must rest on an accurate 
understanding  of  the  system  it  seeks  to  influence.  In  this  context,  we  argue  that  the  innovation 
systems concept is the natural frame in which to design and analyse adaptive policy initiatives.  

In  practical  terms,  this  suggests  a  layer  of  policy  themes.  Without  withdrawing  from  the  role  of 
maintaining  macroeconomic  stability  and  the  rule  of  law,  the  government  assumes  the  remit  of 
overseeing  general  policies  in  relation  to  the  education  system  and  public  research  and 
development expenditure, primarily to provide the supply of trained minds whose imagination will 
be crucial to the experimental process and the growth of knowledge. These are the basic building 
blocks  of  the  innovation  ecology  and  they  require  an  appropriate  supply  of  properly  resourced 
research  organisations  in  which  to  work.  The  range  of  disciplinary  skills  available  and  their 
closeness to the world best practice frontier will also determine their absorptive capacity to adapt 
to  knowledge  generated  within  foreign  ecologies;  for  science  and  technology  are  global  systems 
and the formation of innovation systems  will reflect a search for the best partners wherever they 
are located (Harvey and McMeekin, 2004, 2007).  

More  specifically,  government  can  take  the  lead  in  supporting  particular  areas  of  new  generic 
research,  to  give  firms  and  other  actors  the  confidence  that  local  capabilities  will  be  available  to 
contribute  to  innovation  problem  solving  (Antonelli,  2005).  Within  this  framework,  governments 
frequently create new elements of the innovation ecology, for example, establishing capabilities in 
new areas of science and technology or new research organisations focused on  a particular broad 
area  of  exploitation  where  it  is  necessary  to  combine  together  multiple  disciplines  to  facilitate 
problem solving (Kaiser and Prange, 2004).  

The creation of a rich science  and technology base is only one element of the necessary ecology. 
The primary responsibility for identifying opportunities to innovate, as distinct from opportunities to 
invent,  lies  with  the  firms.  They  are  the  focal  points  in  any  innovation  process  and  if  they  are  to 
draw on the science base they must have the appropriate human capital capabilities to connect. 

7 

 
 
  
Hence,  a  second  strand  of  an  innovation  systems  policy  is  to  further  the  absorptive  capacities  of 
private firms through the employment of qualified scientists and engineers and the conduct of R&D 
and  thus  facilitate  communication  with  the  public  knowledge  base  as  well  as  with  other  firms 
whether suppliers or customers wherever they are located. A promising policy domain is therefore 
that  of  creating  patterns  of  connections  between  different  actors  in  the  innovation  process  in  the 
working hypothesis of not taking for granted the free flow of information between the parties but, 
rather, recognising the barriers to and costs of forming network relationships.  

The  process  of  connecting  the  relevant  ecology  raises  new  dimensions  of  the  innovation  process. 
For example, because the connected elements of the ecology form the external capital of the firm 
or other innovating unit these may be internalised through the market for corporate control, indeed 
the  ability  to  acquire  established  bundles  of  business  capability  is  one  of  the  most  important 
aspects of any innovation system. Similarly, mobility of knowledgeable minds is surely one of the 
most  effective  contributors  to  the  making of  connections  in innovation  systems,  which  is  perhaps 
an  unexpected  take  on  the  significance  of  flexible  labour  markets.  Indeed,  historically,  if  not 
presently,  the  mobility  of  skilled  individuals  has  been  a  principal  form  of  international  technology 
transfer and innovation diffusion.  

This is not to downplay barriers to connection and system emergence or the formulation of policies 
that reduce the costs of connection. The natural desire for commercial confidentiality in a firm does 
not  fit  easily  with  the  rules  of  open  science  in  the  university  system,  indeed  some  authors  have 
expressed deep concerns that too close a degree of interaction between universities and firms can 
undermine  the  nature  of  academic  research  and  subvert  the  knowledge  commons  character  of 
university research (Nelson, 2004). On the other hand, conflicts of a public vs. private nature can 
be  shaped  and  accommodated  by  the  emergence  of  new  instituted  rules  of  the  game,  as  Harvey 
and McMeekin (2007) demonstrate for the new biosciences.  

Furthermore,  because  innovation  systems  are  more  than  invention  systems,  particular  attention 
has  to  be  paid  to  the  integration  of  potential  users  into  the innovation  process.  It  is  already  well 
established  that  firms  identify  their  customers  and  suppliers  as  key  providers  of  information  in 
relation  to  innovation,  a  natural  consequence  of  innovation  systems  being  embedded  in  the  self-
organisation of market relationships (von Hippel, 1986, 1988). Public purchasing programmes and 
the identification of lead users are important ways in which the demand side of innovation systems 
can be influenced by public policy (Edler and Georghiou, 2007). 

It is now apparent that a wide range of complementary policies provide a basis for promoting the 
formation  of  innovation  systems.  They  include  policy  instruments  to  facilitate  collaborative 
research, to incubate University ideas, to use public procurement to build networks or to stimulate 
the formation of clusters but in each case the point is to create connections that will not otherwise 
arise  spontaneously.  Their  principal  purpose  is  to  create  opportunities  and  enhance  innovative 
capabilities  by  stimulating  innovation  system  formation  (Metcalfe  1995,  2003;  Smits  and 
Kuhlmann, 2004).  

From  the  scoping  of  the  literature  emerges  that,  systems  of  innovation  and  relative  innovation 
ecologies  are  situation-specific;  therefore,  it  would be  erroneous  to  think  that  a  broad  innovation 
strategy  can  be  easily  transferable.  On  the  other  hand,  a  functional  representation  of  the 
innovation  system  can  clarify  to  a  degree  of  generalisation,  the  broader  domains  in  which 
innovation policy plays a role in driving forward national economies (Figure 2). 

8 

 
 
Figure 2 – innovation system 

Source: Miles et. 2009 

Policies emerge as tools to strengthen or guide the evolution of the institutional settings, enhance 
those  elements  of  the  innovation  system  that  can  be  important  for  the  future  emergence  of 
innovation  and  link  the  various  elements  in  order  to  foster  synergies  within  the  system. 
Traditionally these policy objectives have been classified according to the "side" they are affecting. 
Supply side policies are in fact designed to support the supply side of the innovation process, the 
firms,  whilst,  demand  side  policies  aim  at  addressing  and  shaping  the  context  within  which  firms 
operate (a taxonomy of innovation policies, their overall orientation and relative goals is discussed 
in the following sections). 

Demand  side  innovation  policies  comprise  measures  to  stimulate  private  demand  for  innovation, 
intelligent  and  pre-commercial  procurement  policies, 
inducement  prizes  and 
standardisation and regulation.  

innovation 

Supply side policies include fiscal incentives and direct support to R&D and innovation, support to 
access  to  finance  of  innovative  ventures,  skill  upgrade  and  human  resources  policies, 
entrepreneurship  policy,  technical  services  and  advice,  cluster,  collaboration  and  networking 
policies. 

A.2  Demand side innovation policies: rationale and policies 

Demand  as  a  stimulus  for  growth  and  as  a  spur  to  innovation  has  been  historically  an  important 
aspect  of  economic  theory  and  policy  development  with  the  government  and  the  public  sector 
generally  playing  an  important  role  in  the  economy  as  a  customer.  However,  in  the  last  two 
decades, the public sector’s role as customer has declined in importance for a number of reasons. 
Attempts to control government expenditure have curtailed public authorities’ procurement, as has 
the privatization of government services, which has moved procurement outside the direct remit of 
government. Also, since 2008, the financial crisis has required governments to implement austerity 
programmes,  limiting  significantly  the  scope  to  use  the  levers  of  both  demand  policy  and  supply 
side initiatives such as government investment in science and technology. Against this background, 
governments have sought new ways of stimulating innovation and growth, and attention has been 
drawn to the use of measures to invigorate and promote demand, including through procurement, 
but also through other policy measures. 

Demand  is  generally  described  in  economics  as  the  desire  and  willingness  to  pay  a  price  for  a 
specific  good  or  service.  While  economic  and  innovation  theory  in  particular  has  adopted  more 
synthetic  accounts  of  innovation  in  which  innovation  is  the  result  of  both  demand  and  supply 

9 

 
 
 
activities  interacting,  there  have  been  significant  efforts  to  tease  out  the  specific  role  of  demand 
upon innovation (Malerba, Nelson et al. 2007) while the role of public demand for technology and 
its  possible  importance  in  economic  policy  has  also  been  researched  over  a  long  period  (Edquist, 
Hommen et al. 2000) leading to recognition by the European Union in 2003 of the role demand and 
in particular the potential importance of public demand (Georghiou, Amanatidou et al. 2003).  

The major impacts of demand upon innovation include: 

 

 

 

 

Selection: demand as ‘selecting mechanisms’ in evolutionary processes; 

Feedback: users/markets provide feedbacks to improve innovation; 

Stimulation: expected markets stimulating the creation and diffusion of innovation; 

Innovation/co-innovation: users as innovators/co-innovators. 

Both  the  size  and  the  structure  of  demand  have  been  highlighted  in  these  studies.  While  large-
scaled markets can reduce the uncertainties of innovation processes and provide suppliers with the 
benefits of economies of scale (Schmookler 1966; Uyarra and Flanagan 2010), demand structures 
interact  and  co-evolve  with  innovation  processes  in  a  more  dynamic  way  (Malerba,  Nelson  et  al. 
2007). Hence certain arrangements of significantly sized demand can favour innovation processes.  

In  particular,  the  notion  of  ‘lead  users’  has  been  raised  by  von  Hippel  to  characterize  a  crucial 
demand arrangement for innovation, which is defined as ‘…users whose present strong needs will 
become  general  in  a  marketplace  months  or  years  in  the  future’;  lead  users  are  important  since 
they  can  ‘serve  as  a  need-forecasting  laboratory  for  marketing  research’  and  meanwhile  ‘provide 
new product concept and design data’ (Von Hippel, 1986 and Miles, 2010). Moving from lead users 
to lead markets (Beise 2004), and as argued by Georghiou (2007), success for policy requires early 
adoption  of  innovation  by  multiple  users  or  else  through  ‘a  single  user  with  sufficient  purchasing 
power to constitute a market on its own’.  

This  role  of  ‘single  user’  and  ‘lead  user’  can  be  fulfilled  by  the  government  through  public 
procurement. A literature has emerged in recent years analysing the influence of procurement on 
the stimulation of innovation and the development of new technologies, and advocating the active 
use  of  public  procurement  as  an  innovation  policy  instrument.  While  an  interest  in  the  use  of 
procurement  as  an  industrial  and  technology  policy  tool,  as  we  have  seen,  is  not  new,  there  has 
been a renewed focus on this underexploited policy tool (Edler and Georghiou, 2007). Interest has 
been encouraged by the recommendations of a number of inquiries, reports and policy documents 
(e.g.  Edler  et  al.,  2005;  European  Commission,  2005;  Aho  et  al.,  2006).The  Innovation  Union, 
Europe 2020 flagship initiative aims at increasing Europe’s research and innovation performance by 
bringing ideas to markets faster. 

Miles  and  Rigby  (2013)  investigated  various  modes  and  rationales  of  demand  influence  on 
innovation,  and  NESTA  (2010)  has  investigated  how  customer  demand  shapes  innovation 
processes in organizations in selected sectors2. Other important work on the link between demand 
and  innovation  and  policy  includes  that  by  the  OECD  (2011)  which  focuses  on  discussing  the 
impacts  of  societal  demand  upon  eco-innovation  and  introduces  a  way  of  designing  demand-side 
policy mixes. The demand side innovation policy-toolbox includes:  

1. 

2. 

3. 

4. 

5. 

6. 

Measures to stimulate private demand for innovation;  

Public procurement policies;  

Pre-commercial procurement;  

Innovation inducement prizes;  

Standardisation and standards and  

Regulation. 

Edler and Georghiou  (2007)  have defined demand side innovation policy as ‘…all public measures 
to induce innovations and/or speed up diffusion of innovations through increasing the demand for 
innovations,  defining  new  functional  requirement  for  products  and  services  or  better  articulating 
demand’.  

2 

Specific  country  and  area  reviews  of  policy  include  Buchinger,  who  introduces  Austrian  experience 
regarding public procurement as part of the demand side innovation policy mix. Roolaht (Roolaht, 2010) 
importantly  has  discussed  smaller  EU  countries  as  the context for demand-side  innovation  policies  and 
what pre-conditions in terms of institutional requirement are required for the implementation of demand 
side instruments. 

10 

 
 
 
                                                 
The  rationale  for  demand  side  policies  is  straightforward:  policy  makers  seek  to  drive  those 
technologies, products and services  in  order  to promote economic growth and welfare, contribute 
to  societal  challenges  and  to  make  public  services  more  effective.  This  is  done  through  demand 
side  measures.  There  is  however,  a  great  deal  of  overlapping  and  interrelation  between  demand 
and  supply  side  as  policies  do  not  usually  operate  in  a  vacuum.  Demand-side  innovation  policies 
can  be  subject  to  various  typologies  (conceptual  classifications)  and  they  can  also  be  grouped 
according  to  what  forms  the  policies  have  taken  in  practice  according  to  a  single  principle  of 
classification  (a  taxonomic  approach).    Our  view  is  that  while  it  is  useful  to  employ  classificatory 
approaches  of  measures  that  focus  upon  conceptual  distinctions,  in  practice,  the  field  of  demand 
side  policies  is  complex  and  at  this  moment  in  time  a  more  pragmatic  arrangement  of  the 
measures is needed that is based on existing understandings and classification approaches, hence 
we  follow  Edler’s  approach  (OECD  2011;  Edler  2013;  Peter,  Bruno  et  al.  2013)  and  use  a  simple 
taxonomic method to grouping of the demand-side measures to create clear distinctions and more 
coherent categories of measures with which to work.  

The proposed taxonomy in this study has four main types of measures: a) support and shaping of 
demand  by  the  public  sector  (Public  demand);  b)  shaping  and  influencing  of  private  demand 
(Private  demand);  c)  regulatory  approaches  (Regulations);  and  d)  systemic  approaches  that 
combine  measures  of  the  other  demand  types  and  that  support  the  supply  side  (Systemic 
approaches).  In  the  table  below,  the  four  main  categories  of  demand  side  measures  are 
introduced.  

Table 1 Demand Side Measures Typology 

Public demand 

Private demand 

•  General  procurement  (innovation  as  an 
in  the  tendering  and 

essential  criterion 
assessment processes) 

•  Strategic  procurement  (the  demand  for 
certain  technologies,  products  or  services  is 
encouraged) 

•  Cooperative  and  catalytic  procurement 
(public  agencies  purchase  in  connection  with 
private demand) 

•  Direct/financial 

support 

(demand 

subsidies and tax incentives) 

labelling 

•  Indirect/soft steering support (awareness 
building; 
information 
campaigns;  training  and  further  education; 
articulation  and 
foresight;  user-producer 
interactions) 

and 

Regulations 

Systemic approaches 

•  Regulation of demand (to create a market; 

process and “usage” norms) 

•  Regulation  of  the  demander  –  producer 
interface  (regulating  product  performance 
and  manufacturing; 
product 
innovation-friendly 
information;  supporting 
private regulation activities) 

regulating 

Source: Authors adapted from Edler (2013) 

•  Integration  of  demand-side  measures 
(strategically  co-ordinated  measures  which 
combine various demand-side instruments) 

•  Integration  of  demand-  and  supply-side 
logic  and  measures 
(combination  of 
supply-side  instruments  and  demand-side 
impulses 
technologies  or 
services;  conditional  supporting  of    user-
producer 
pre-commercial 
procurement) 

interaction; 

selected 

for 

11 

 
 
 
 
A.3  Supply side policies: rationale and policies 

According  to  Miles  and  Rigby  "one  of  the  oldest  schisms  in  innovation  studies  is  between 
technology push and market pull accounts of innovation" (Miles, 2010; Miles and Rigby, 2013, page 
37).  The  technology  push  side  focuses  on  the  fact  that  innovation  lie  mainly  in  research  (and 
innovation  activities  of  the  firms),  whereby  inventors  create  opportunities  to  satisfy  consumers' 
needs. The market pull side conversely, put forwards the idea that innovation derives from people's 
needs and it is expressed  through  market  demand.  Of course, both supply side and demand side 
are  tangible  drivers  of  innovation,  but  their  role  in  affecting  the  types  and  the  outcome  of  the 
innovation  process  is  rather  different.  Technology  push  is  in  fact  supposed  to  encourage  more 
radical innovation whilst market pull fosters more incremental ones.  

Paraphrasing Schmookler (1966), Innovation is a two-sided activity.  On the one hand, it involves 
the recognition of a need or, in economic terms, a potential market for a new product or process.  
On the other hand, it involves technical knowledge, which may be generally available or may also 
include  new  scientific  and  technological  knowledge,  the  result  of  original  research  activity.  The 
crucial  contribution  of  the  entrepreneur  is  to  link  the  novel  ideas  and  the  market  (Freeman  and 
Soete, 1997). Needless to say, this is an oversimplification. The search activities aiming to produce 
new  knowledge  and  transform  it  into  new  products  -  including  research,  development  and 
innovation  -  form  a  complex  nexus.    A  vast  literature  has  dealt  with  it  the  past  few  decades 
(Freeman and Soete, 1997; Fagerberg et al, 2005; Tassey, 2007; Malerba and Vonortas, 2009).  

While  the  demand  side  of  innovation  has  always  been  of  importance  to  economists,3  in  practice 
supply-side  factors  for  innovation  have  received  much  more  attention  that  demand-side  factors 
during  the  past  few  decades  (OECD,  2011).    There  are  various  reasons  for  that,  probably  going 
back to the powerful statement of Vannevar Bush (1945) reasoning at the conclusion of World War 
II why modern  societies just cannot afford to  not  support science  systematically  for both  security 
and  a  host  of  socio-economic  benefits.    All  of  them  did  and  all  of  them  have  needed  significant 
assistance in making their investment decisions in RTDI. From this rationale, supply side innovation 
policies  focused  on  the  role  of  research  and  technological  development,  the  provision  of  a 
workforce  trained  in  subjects  such  as  Science,  Technology,  Engineering  and  Mathematics  (STEM) 
and stipulations of opportunities for innovation to thrive (Edler et al, 2013).  

In  policy  terms  these  stipulations  translated  in  the  measures  to  facilitate  access  to  financing 
innovative  venture,  publicly  supported  venture  capitals  and  loan  guarantees.  Entrepreneurship 
policies,  support  measures  for  exploiting  intellectual  property  and  technical  services  have  been 
added to the toolbox of the innovation policy maker in order to foster efficiency and effectiveness 
of  RTDI  investments  and  translate  scientific  and  technical  knowledge  into  business  propositions 
(Edler et al 2013).  

With the recognition of the importance in the innovation process of the links between the various 
systems'  agents  (Teece,  1986  and  1992,  Tidd  et  al,  1997,  Tether,  2002)  and  the  innovation 
augmenting effects of synergies between said agents, the supply side policy toolbox enriched with 
instruments  aiming  at  fostering  co-operations  and  collaborations.  Supply  side  policies  geared 
towards  this  aim  include  cluster  policies,  policy  to  support  collaboration  for  R&D  and  Innovation 
and innovation network policies (Edler et al, 2013).  

More  recently,  however,  following  the  powerful  statements  in  the  Aho  report  (2006),  there  has 
been  a  strong  surge  of  policy  interest  in  Europe  on  demand-side  instruments  (Georghiou,  2005; 
Edler and Georghiou, 2007; Edquist and Zabala, 2012).  

3  

For  instance,  one  of  the  most  extensive  literatures  in  economics  on  diffusion  of  innovations  has  dealt 
disproportionately with demand-side factors than with supply-side (Stomeman, 2002; Rosegger, 1996).  

12 

 
 
 
 
                                                 
A.4  Framework condition for innovation  

A  recent  report  of  the  MIoIR  (Allman  et  al  2011)  identifies  six  key  categories  of  framework 
conditions. These  are  defined  as those  components of the innovation system that are  outside the 
firms, key innovators in the market place,  and are characteristics of  the competitive  environment 
within which the innovative firms operate. These six key elements are: 1) the public research base, 
2)  demand  conditions,  3)  the  degree  of  competition  within  the  market,  4)  human  resources,  5) 
finance and 6) infrastructure and services. Whilst these might pertain to the sphere of either supply 
or demand for innovation, their role is of a basic systemic nature and are key components of the 
innovation  process  either  through  their  role  in  sustaining  the  creation  of  new  knowledge  and  the 
recombination of existing knowledge, or to providing the necessary incentive to innovate, or even 
providing key resources to the innovation process. These categories affect the firms’ capabilities to 
innovate and are reflected in the firms’ entrepreneurial orientation4 and their innovation capabilities 
in the wider business environment. 

In  other  words,  frameworks  conditions  provide  to  the  innovation  stakeholders  basic  resources, 
incentives,  capabilities  and  opportunities  to  innovate  through  the  provision  of  scientific  and 
technical knowledge, appropriately skilled people, competitive market conditions, finance and 
services.  The  rationale  for  policy  intervention  in  each  of  the  key  components  identified  is 
linked  to  their  unique  characteristics  as  well  as  the  linkages  between  and  amongst  each 
component:  as  described  in  this  review,  innovation  policy  pertain  interventions  on  the 
various  elements  of  the  innovation  system  and  those  linkages  and  connections  between 
them that generate superadditivity and additionality. 

A.5  Innovation Policy Mix 

Bringing together the supply and the demand side policies as part of a more integrated approach is 
at  the  centre  of  a  lively  debate.  Systemic  approaches  are  attempts  (1)  to  combine  different 
demand  side  measures  or  (2)  to  combine  demand  and  supply  side  measures  and  framework 
conditions. The basic idea is that (a) there are different needs and failures at play at the same time 
that need to be tackled by policy measures, that (b) needs for support change in different phases 
of an innovation (over time) or that (3) different target groups have different needs for support.  

Nonetheless, combining innovation policies either in mode 1) demand side policies, or in mode 2) 
supply and demand  side policies,  described above, presents several  hurdles and a high degree of 
complexity.  The  complexity  derives  from  interdependencies  and  interactions  between  different 
policy instruments implemented and the extent to which intended policy outcomes can be achieved 
(Flanagan  et  al,  2011).  In  other  words,  the  outcome  deriving  from  the  combination  of  different 
policies,  specifically  supply  side  and  demand  side policies  may  imply  a  level of  complexity  that is 
difficult to assess ex-ante, in interim, or ex-post.  

A recent review has shown that explicit systemic approaches are rare, the Lead Market Initiative or 
market  transformation  measures  in  the  energy  sector  being  two  examples  (Cunningham  et  al 
2013). 

A.6  Interaction  between  supply  and  demand:  linking  demand  side  policies  to  supply 

side for an integrated assessment 

The interplay of measures has been conceptualised in different “systemic” approaches. Smits and 
Kuhlmann  (2004)  in  an  early  paper  on  the  rise  of  systemic  instruments  argue  that  innovation 
systems  need  to  fulfil  five  functions,  i.e.  1)  managing  interfaces,  2)  construction  of  systems,  3) 
providing  platforms  for  learning  and  experimenting,  4)  providing  infrastructure  for  strategic 
intelligence, and 5) stimulating demand articulation, strategy and vision development. To fulfil the 
functions especially the last  one which  is closely related to the demand side, various instruments 
need to be integrated. Wieczorek and Hekkert(2012) take the Smits and Kuhlmann arguments and 
propose  their  application  to  sustainability  challenges.  Borras  and  Edquist  (2013)  propose  an 
approach to systemic policy design that is problem oriented. They argue that diagnosis of system 
activities  need  to  be  conducted  and  ‘mixes’  of  policies  need  to  be  designed  based  on  problems 
identified. Other major contributions include (Beise, Blazejczak et al. 2003) which investigates the 
impacts  of  lead  markets  on  environment  friendly  innovation  and  the  various  demand  side  policy 
efforts  (notably  regulations  and  subsidies)  in  creating  lead  markets.  Rigby  (2013)  reviews  the 
effect  of  pre-commercial  procurement  (PCP)  on  innovation,  concluding  that  in  essence  pre-
commercial procurement is a type  of  integrated  measures lying at the interface  between demand 
(need  specified  by  a  clear  public  demand)  and  supply  (grant  for  the  winner  of  the  competition 

4  

Entrepreneurial  orientation  is  the  entrepreneur’s  proactive  behaviour  towards  risk-taking  ventures  and 
innovation (Frank et al, 2010). 

13 

 
 
                                                 
rather  than  purchase  of  a  product).  Finally,  innovation  policy  road  mapping  (IPRM)  has  been 
proposed  as  an  instrument  for  forward  looking  systemic  policy  design  (Ahlqvist,  Valovirta  et  al. 
2012), to link technological advancement with societal demand, with a consideration of longer term 
development goals and public procurement.   

All these examples point to the complexity of policy intervention and to the need to understand the 
co-existence  of  different  needs  and  measures  (deliberate  or  not),  both  on  the  demand  and  the 
supply side for the design, implementation and evaluation of policy. 

Table 2: Demand-side innovation policy measures – systemic approaches 

Systemic Approaches  

Integrated demand 
measures 

Strategically  co-ordinated  measures  which  combine  various  demand-
side instruments  

Combination  of  supply-side  instruments  and  demand-side  impulses 
for  selected  technologies  or  services  (including  clusters  integrating 
users and supply chains). 

Integration  of  demand- 
and supply-side logic and 
measures 

Conditional  supporting  of  user-producer  interaction  (R&D  grants  if 
user involved)  

Specific Instrument: Pre-commercial Procurement (Rigby 2013) 

Source: Edler (2013) 

Moreover, demand policies are aimed at triggering innovative activity on the supply side as a result 
of increased and more challenging demand. This suggests that the impact of demand side policies 
have,  in  general,  is  multi-dimensional.  A  simplified  impact  story  of  demand  side  measures,  not 
differentiated for different kinds of instruments, is illustrated in the figure below. 

A.7  Efficiency and effectiveness of the Innovation Policy Mix 

Regarding the efficiency and effectiveness of combined supply and demand side innovation policies, 
a  few  words  are  necessary  in  order  to  understand  the  magnitude  of  the  problems  at  hand  and 
devise a practical and effective strategy to face them. In the words of Flanagan et al. (2011):"the 
sheer complexity of the policy process precludes any static-comparative analysis of instruments as 
if they were stable, discrete and independent units" (p. 709). Assessing which innovation systems 
configuration  is  likely  to  prevail,  or  how  the  policy  mix  will  affect  (directly  or  indirectly)  the 
innovation performance of the system implies that the general framework adopted in the exercise 
has  to  be  dynamic  in  nature  and  consider  the  connections  between  instruments  and  their  effects 
‘loose’ with many unanticipated outcomes. 

The  structure  of  the  assessment  proposed  will  therefore  necessarily  involve  consideration  of  the 
dimensions  in  which  interactions  between  and  amongst  policies  will  occur  (policy  space, 
governance space, geographical space and time) and the possible types of interactions (between 
different  mixes  targeting  the  same  issue;  instrument  mixes  targeting  different  issues  and 
instrument  mixes  targeting  processes),  as  shown  in  the  Figure  4  below.  This  exercise  will  be 
conducted  across  the  various  dimensions  identified.  Moreover,  it  will  be  necessary  to  highlight 
conflicts  and  tensions  between  instruments  in  the  policy  mix.  Such  conflicts  might  relate  to  the 
rationale, the policy goals and finally to the particular implementation process. 

14 

 
 
Figure 3:  conceptualising  policy  mix  interactions:  dimensions,  types  and  potential 

sources of tension 

Flanagan et al. 2011, page 709. 

A.8  Drivers, barriers and challenges 

We  have  highlighted  the  three  dimensions  of  impact  of  demand  side  measures.  This  already 
pointed  towards  the  specific  challenge  of  demand  side  policy  to  understand  the  rationale  and 
mechanisms of measures in order to create effects on all three dimensions (impact on target group 
on the demand side, impact on suppliers of innovation, social and economic impact more broadly). 
There is an enormous challenge of strategic intelligence to understand the policy need and leverage 
for all three dimensions, which goes far beyond the traditional remit of policy makers on the supply 
side. Further key challenges following out of that multi-dimensional setting that are associated with 
demand  side  policy  measures  are  well  covered  in  the  OECD  summary  (OECD  2011).    This  study 
reports on a number of significant barriers to successful implementation of systemic policies where 
the  aim  is  to  use  complementary  instruments  to  generate  greater  effect.  Secondly,  the 
coordination  costs  of  working  with  both  demand  and  supply  mechanisms  can  be  high.  In  fact, 
taking  the  time  to  understanding  the  interactions  between  the  demand  and  supply  side  can  be 
costly for the public sector. Moreover, the public sector is not always well prepared to take on the 
lead role required to manage this process. The need for intervention is also sometimes difficult to 
assess,  with  the  logic  and  rationale  for  systemic  measures  being  hard  to  determine.  This  can  be 
made  more  difficult  because  of  the  “value  chain”  of  innovation  is  complex  and  difficult  to 
understand,  making  intervention  choices  difficult  to  choose  between.  Understanding  what 
technologies  might  be  required  –  in  terms  of  specifying  demand  –  is  again  difficult  for  the  public 
sector actors which traditionally  may have  resources  and capabilities to understand the "direction 
of  change  required  by  the  system  of  innovation",  but  may  lack  capacity  in  identifying  and 
implementing  new  technologies.  The  work  conducted  thus  far  focuses  on  teasing  out  those 
strategic technology areas whereby there may be lock-in situations that make markets difficult to 
shape with particular attention to the structure of incentives which may simply be hard to change 
even with the benefit of systemic/strategic measures (Tsipouri, 2013). 

15 

 
 
 
 
 
 
 
A.9  Selected Bibliography 

Ahlqvist, T., V.  Valovirta, et  al.  (2012).  "Innovation policy  roadmapping as  a systemic instrument 
for forward-looking policy design." Science and Public Policy 39: 178-190. 

Allman,  Kurt,  Jakob  Edler,  Luke  Georghiou,  Barbara  Jones,  Ian  Miles,  OmidOmidvar,  Ronnie 
Ramlogan,  and  John  Rigby  (2011)  Measuring  Wider  Framework  Conditions  for  successful 
innovation:  A  system’s  review  of  UK  and  international  innovation  data”,  Report  NESTA,  United 
Kingdom, January 

Beise,  M.  (2004).  "Lead  markets:  country-specific  drivers  of  the  global  diffusion  of  innovations." 
Research Policy 33: 997-1018. 

Bleda,  M.  and  Del  Rio,  P.  "The  market  failure  and  the  systemic  failure  rationales  in  technological 
innovation systems." Research Policy 42, no. 5(2013) : 1039-1052.  

Blind, K., 2013. Standardisation and Innovation, Compendium of Evidence on the effectiveness of 
Innovation  Policy.  MIoIR,  the  University  of  Manchester  and  NESTA,  London.  Available  at: 
http://innovation-policy.org.uk 

Blind,  K.,  2012.  The  Impact  of  Regulation  on  Innovation.  Compendium  of  Evidence  on  the 
effectiveness  of  Innovation  Policy,  MIoIR,  the  University  of  Manchester  and  NESTA,  London. 
Available at: http://innovation-policy.org.uk 

Blind,  K.,  Bekkers,  R.,  Dietrich  Y.,  Iversen,  E.,  Köhler,  F.,  Müller,  B.,  Pohlmann,  T.,  Smeets,  S., 
Verweijen,  J.,  2011.  Study  on  the  Interplay  between  Standards  and  Intellectual  Property  Rights 
(IPRs). European Commission: Luxembourg. 

Borrás,  S.,  and  Edquist,  E.  (2013).  The  choice  of  innovation  policy  instruments. Technological 
forecasting and Social Change. 80(8), 1513-1522. doi:10.1016/j.techfore.2013.03.002. 

Cunningham, P., Edler, J., Gok, A., &Shapira, P. (2013). Impacts of Innovation Policy:  Synthesis 
and Conclusion,  

Cunningham, P.; Edler,. J.; Flanagan, K.; Laredo, P. (2013): Innovation policy mix and instrument 
interaction.  A  review.  Compendium  of  Evidence  on  the  Effectiveness  of  Innovation  Policy 
Intervention  Project.  MIoIR,  the  University  of  Manchester  and  NESTA,  London.  Available  at: 
http://innovation-policy.org.uk 

Edler, J. and L. Georghiou (2007).  "Public procurement  and  innovation—Resurrecting  the demand 
side." Research Policy 36: 949-963. 

Edler,  J.,  Georghiou,  L.,  Blind,  K.,  &Uyarra,  E.  Evaluating  the  demand  side:  New  challenges  for 
evaluation, Research Evaluation, 21, (21012) pp 33-47. 

Edler,  J.,  Georghiou,  L.,  Uyarra,  E.,  Cox,  D.,  Rigby,  J.,  &Nugroho,  Y.  (2009).  Monitoring  and 
Evaluation  Methodology  for  the  EU  Lead  Market  Initiative.  Concept  development  for  the  EU 
Commission. 

Edler, J., Cunnigham, P.N., Gok, A., and Shapira P., (2013) Impact of Innovation Policy: Synthesis 
and  Conclusions.  Compendium  of  evidence  on  the  effectiveness  of  innovation  policy  intervention. 
MIoIR,  the  University  of  Manchester  and  NESTA,  London.  Available  at:  http://innovation-
policy.org.uk 

Edler,  Jakob  (2013)  “Review  of  Policy  Measures  to  Stimulate  Private  Demand  for  Innovation. 
Concepts  and  Effects”,  MIoIR,  the  University  of  Manchester  and  NESTA,  London.  Available  at: 
http://innovation-policy.org.uk 

Edquist,  C.  (ed.)  (1997).  Systems  of  innovation:  technologies,  institutions  and  organizations. 
Routledge, Milton Park.  

Edquist, C. and J. M. Zabala-Iturriagagoitia (2012). "Public Procurement for Innovation as mission-
oriented innovation policy." Research Policy 41(10): 1757-1769. 

16 

 
 
Edquist,  C.  and  L.  Hommen  (1999).  "Systems  of  innovation:  theory  and  policy  for  the  demand 
side." Technology in Society 21(1): 63-79. 

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retrieved http://ec.europa.eu/research/erab/pdf/recommendations-on-gc-research_en.pdf 

European Commission (2006) “Creating an Innovative Europe”, (Aho) Report, Luxembourg: Office 
of the Official Publications of the European Union. 

European  Commission,  (2008)  DG  Research  and  Innovation,  Challenging  Europe’s  Research: 
Rationales  for  the  European  Research  Area  (ERA)  -  Report  of  the  ERA  Expert  Group,  Publications 
Office of the European Union, Luxembourg, 2008 

European  Commission.  (2010)  Europe  2020:  a  strategy  for  smart,  sustainable  and  inclusive 
growth. Communication from the Commission:Com(2010) 2020 final 

European  Commission  (2012),  final  A  Reinforced  European  Research  Area  Partnership  for 
Excellence and Growth. European Commission, COM(2012) 392 

Fagerberg,  Jan,  David  C.  Mowery  and  Richard  R.  Nelson  (eds.)  (2005)  The  Oxford  Handbook  of 
Innovation, Oxford University Press. 

Flanagan,  K.,  Uyarra,  E.,  &Laranja,  M.  (2011).  Reconceptualising 
innovation. Research Policy, 40(5), 702-713. 

the 

‘policy  mix’for 

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A replication study, in SBR, 62, April 2010, 175-198. 

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innovation: Choice, design and assessment. Technological Forecasting and Social Change. October, 
2013 

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Effectiveness  of  Public  Support  Mechanisms  for  Private  Sector  Research  and  Development:  Direct 
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Agrobacterium tumefaciens’, Nature Biotechnology, Vol. 22, No. 7, pp. 807-810.  

Harvey,  Mark,  and  McMeekin,  Andrew,  2007.  ‘Public  or  Private  Economies  of  Knowledge: 
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Hippel, E.v. (1988): The Sources of Innovation. The MIT Press 

Izsak,  K.  and  J.  Edler  (2011).  Trends  and  Challenges  in  Demand-  Side  Innovation  Policies  in 
Europe. 

Knell,  M.  (2012).  Demand  Driven  Innovation  in  Economic  Thought.  UNDERPINN  conference. 
Manchester. 

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Malerba, F., R. Nelson, et al. (2007). "Demand, innovation, and the dynamics of market structure: 
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371-399. 

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Innovation  Ecologies:  Innovation  Policy  and  Restless  Capitalism,  Openloc  –  University  of  Trento 
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Miles,  I.  (2010)  Demand-led  Innovation,  Mini  Study  11,  Global  Review  of  Innovation  Intelligence 
and Policy Studies. PRO INNO EUROPE – INNOGRIPS, 2010. 

Miles,  I.  and  J.  Rigby  (2013).  Demand-Led  Innovation.  Innovation  Policy  Challenges  for  the  21st 
Century. D. Cox and J. Rigby. 

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innovation policy." Research Policy 41(6): 1058-1071. 

17 

 
 
Peters, M., M.  Schneider, et al.  (2012). "The impact of  technology-push and  demand-pull  policies 
on technical change - Does the locus of policies matter?" Research Policy 41(8): 1296-1308. 

Rigby,  J.  (2013).  Review  of  Pre-commercial  Procurement  Approaches  and  Effects  on  Innovation. 
Compendium  of  Evidence  on 
Intervention. 
the  Effectiveness  of 
London/Manchester, NESTA/MIOIR. 

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Rigby, J., Boekholt, P., Semple, A., Deuten, J., Apostol, R., Corvers, S., Edler, J. (2012). Feasibility 
study on future EU support to public procurement of innovative solutions: Obtaining Evidence for a 
Full Scheme  

Rogers, Everett M. (1983), Diffusion of Innovations, 3rd ed. New York: The Free Press. 

Rolfstam,  M.  (2012).  "Understanding  Public  Procurement  of  Innovation  :  Definitions  ,  Innovation 
types and Interaction modes." 1-16. 

Schmookler, J. (1966), Invention and Economic Growth, Harvard University Press, Cambridge, MA. 

Schumpeter, Joseph A. (1942) Capitalism, Socialism and Democracy, Harper & Row. 

Smits,  R.  and  S.  Kuhlmann  (2004).  "The  rise  of  systemic  instruments  in  innovation  policy." 
International Journal of Foresight and Innovation Policy 1: 4-32. 

Stefano,  G.,  A.  Gambardella,  et  al.  (2012).  "Technology  push  and  demand  pull  perspectives  in 
innovation  studies:  Current  findings  and  future  research  directions."  Research  Policy  41:  1283-
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Stoneman, Paul (2002) The Economics of Technological Diffusion, Blackwell. 

Teece,  David  1986.  Profiting  from  technological  innovation:  implications  for  integration, 
collaboration, licensing and public policy." Research Policy 15:285-305. 

D.J.  Teece  (1992)  Competition,  cooperation  and  innovation:  organisational  arrangements  for 
regimes  of  rapid  technological  progress  Journal  of  Economic  Behaviour  and  Organization,  18 
(1992), pp. 1–25 

Tether  B.S.  (2002)  Who  co-operates  for  innovation,  and  why:  An  empirical  analysis  Research 
Policy, Volume 31, Issue 6, August 2002, Pages 947–967 

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Organisational Change. Wiley, Chichester. 

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Discussion  paper  for  the  2013  ERAC  mutual  policy  learninf  seminar  on  research  and  innovation 
policies – SESSION II – Brussels, March 2013. 

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Uyarra,  E.  (2012).  Review  of  Measures  in  Support  of  Public  Procurement  of  Innovation. 
Compendium  of  Evidence  on  the  Effectiveness  of  Innovation  Policy  Intervention.  MIoIR,  the 
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Uyarra, E. and K. Flanagan (2010). "Understanding the Innovation Impacts of Public Procurement." 
European Planning Studies 18: 123-143. 

18 

 
 
 
 
 
Annexe B.  Illustrative logic model for intervention to promote establishment 

and uptake of standards 

Standards enhance the diffusion of innovation and also provide technical information to producers.  
More specifically, the literature identifies four types of benefit5: 

 

 

 

 

Providing for inter-operability or compatibility between different parts of a product or 
between products as part of a system or network. 

The provision of a minimum level of quality, which may be defined in terms of functionality 
or safety of products (potentially valuable to consumers and producers) 

The reduction of variety, allowing for economies of scale. 

The provision of information (through the technical specification of the standard.  In addition, 
standards may be a useful predictor of future regulations). 

Note there may also be drawbacks: 

 

 

 

Timing is key; too early and the sector may have to work with inappropriate standards; too 
late and many of the potential benefits may be lost 

Standards can constrain as well as promote innovation.  The DTI study6 found that a positive 
correlation between firms which felt they promoted innovation (because of the information 
provided), but also constrained because they dictated a certain technology trajectory7 

Less variety may reduce competition 

The  rationale  for  intervention  must  explain  why  standards  do  not  emerge  through  market  forces 

(as some do).  Possible explanations include: 

 

 

 

The benefits accrue to many without imposing additional costs – Standards as a public good 

Public standards may have greater credibility than industry defined ones and require public 
intervention of some sort 

Coordination costs may be lower when the public sector is involved; perhaps especially true 
in relation to international standards 

More speculatively, government may have a better overview of the links between different markets 
and  services  and  the  impacts  of  standards  on  non-market  considerations  (e.g.  the  environment).  
It may therefore be well-placed to assess whether emerging standards are appropriate 

5  

6  

7  

DTI 2005 The Empirical Economics of Standards, DTI Economics Paper No. 12.   

2005 op cit 

It is often said that the QWERTY keyboard was designed to slow typists down because the first machines 
could not handle rapid typing.  It has remained the de facto standard 

19 

 
 
 
 
                                                 
Objectives 

Inputs 

Activities 

Outputs 

Intermediate 
Outcomes 

Final Outcomes 

Objectives could 

Funding 

Uptake of existing standards 

 

Processes 

  Adoption of 

Diffusion/adoption of 

include: 

Technical 

  Awareness raising 

established to 

standards by 

new products/services 

 

Promoting adoption 

expertise 

  Access,  

develop standards 

businesses 

more widely, e.g. as 

(libraries/repositories) 

  Businesses involved 

 

Potentially, revisions 

determined by sales of 

products/ services 

in these processes 

to international 

  Number of new 

standards 

of existing 

standards 

Consensus 

building 

  Development of new 

standards  

In both cases the 

objective being to 

promote the diffusion of 

innovation to meet 

economic and social 

needs 

 

Technical assistance with 

adoption 

Developing new standards 

 

Technical support (for 

public laboratories or 

funding research 

programmes) 

  Convening stakeholders and 

consensus building 

  Coordination with 

international developments 

  Articulating public sector’s 

requirements. This could be 

because it is a major 

purchaser, for example 

health, defence, or because 

it has a specific policy 

responsibility, for example 

environmental protection  

standards developed 

  New improved 

Enhanced technical 

 

Links to 

international 

standards 

  Adoption of 

standards by 

businesses 

products and 

knowledge of businesses 

services 

Business performance 

benefits in terms of 

turnover, profitability 

Possible contribution to 

Policy objectives : 

  Environment 

  Energy 

 

Transport 

  Health. 

  Education 

  Defence 

20 

 
 
 
 
 
Objectives 

Inputs 

Activities 

Outputs 

Intermediate 
Outcomes 

Final Outcomes 

Underpinning theories of change 

Theory of change assumptions: strategy 

Theory of change assumptions: 

Theory of change assumptions: benefits 

implementation 

All in terms of additionality/net benefits 

 

The four key issues which standards 

address, (see above) especially the 

 

Public sector agents have sufficient 

first two are constraining the 

knowledge and contacts to make a 

diffusion of innovation 

real contribution 

 

Standards open up new markets through interoperability of 

technologies.  This creates opportunities for businesses to 

supply complementary product and services.  Probably 

more importantly, users (businesses and consumers) are 

 

New (or revised) standards, or 

 

Policy interventions work with the 

able to access new technologies more effectively and at 

increased adoption of existing 

grain of private sector developments 

lower cost leading to more effective production processes 

standards are the most appropriate 

(industry defined standards) rather 

and increased final consumer benefits. 

way to address these issues or have 

than as a substitute 

 

Standards also provide technical information and ‘quality’ 

a significant role in relation to other 

interventions 

where appropriate standards can be 

 

Technology has developed to the stage 

mark for consumers, which results in greater uptake 

 

Economies of scale arising from a narrow range of products 

outweigh any costs from reduced user/consumer choice and 

 

Need for a clear view on the 

reduced competition in product/service markets  

 

New standards and their adoption are 

identified 

a cost-effective means of addressing 

market/system failures 

appropriate level of standards: de 

 

There are market or system failures 

facto, national, international 

which inhibit new standards merging 

or the adoption of existing standards. 

The public sector has a role in 

addressing these failures 

 

Target group of beneficiaries is able to exploit standards in 

the face of potential increased competition from non-target 

businesses (other regions/countries etc.) 

 

Standards are appropriate, so that constraints to innovation 

are outweighed by the stimulus.  Timing is important to 

avoid introducing the standards either too early or too late 

21 

 
 
 
 
 
Annexe C. 

Cases studies 

C.1.  Small Business Innovation Research (SBIR) 

Policy Name 
and URL 
Promoting 
Institution 
Level of 
involvement 

 Small Business Innovation Research (SBIR) 
http://www.sbir.gov/  
US government 

Country 
(Region) 

United States 

US Federal Agencies. The following 11 federal agencies currently participate in the 
program: 

  Department of Agriculture 

  Department of Commerce - National Institute of Standards and Technology 

  Department of Commerce - National Oceanic and Atmospheric Administration 

  Department of Defence 

  Department of Education 

  Department of Energy 

  Department of Health and Human Services 

  Department of Homeland Security 

  Department of Transportation 

  Environmental Protection Agency 

  National Aeronautics and Space Administration 

  National Science Foundation 

Key characteristics 

The Small Business Innovation Research (SBIR) program is a competitive program that encourages 
domestic small businesses to engage in Federal Research and Development that has the potential 
for  commercialization.  Through  a  competitive  awards-based  program,  SBIR  enables  small 
businesses  to  explore  their  technological  potential  and  provides  the  incentive  to  profit  from  its 
commercialization. The program’s goals are the following: 

1. 

2. 

3. 

4. 

Stimulate technological innovation 

Meet Federal research and development needs. 

Foster and encourage participation in innovation and entrepreneurship by socially and 
economically disadvantaged persons. 

Increase private-sector commercialization of innovations derived from Federal research and 
development funding. 

Each year, Federal agencies with extramural research and development budgets that exceed $100 
million are required to allocate 2.8% of their R&D budget to these programs. Currently, 11 Federal 
agencies  participate  in  the  program  (see  under  “level  of  involvement”  the  list  of  participating 
agencies).  Each  agency  administers  its  own  individual  program  within  guidelines  established  by 
Congress.  These  agencies  designate  R&D  topics  in  their  solicitations.  Awards  are  made  on  a 
competitive basis after proposal evaluation. 

SBIR  targets  the  entrepreneurial  sector  because  that  is  where  most  innovation  and  innovators 
thrive.  However,  the  risk  and  expense  of  conducting  serious  R&D  efforts  are  often  beyond  the 
means of many small businesses. By reserving a specific percentage of federal R&D funds for small 
businesses, SBIR protects the small business and enables it to compete on the same level as larger 
businesses.  SBIR  funds  the  critical  start-up  and  development  stages  and  it  encourages  the 
commercialization  of  the  technology,  product,  or  service,  which,  in  turn,  stimulates  the  U.S. 
economy.  

The SBIR is in fact, a public procurement program for small firms. This policy instrument aims at 
providing  early-stage  financial  support  to  high-risk  innovative  technology-based  small  firms  with 
commercial promise. From the governments’ perspective, SBIR stimulates technological innovation, 
ultimately boosting innovation and growth,  while at the same time provides government agencies 
with  new,  cost-effective,  technical  and  scientific  solutions  to  meet  their  needs.  From  the  firm’s 

22 

 
 
 
perspective, features that make SBIR contracts attractive (besides from the funding itself), include 
the fact that there is no dilution of ownership or repayment required. Award recipients retain rights 
to intellectual property developed using the SBIR award, with no royalties owed to the government. 
The  government  retains  royalty-free  use  for  a  period,  but  this  is  very  rarely  exercised.  The  SBIR 
Program is structured in 3 phases: 

 

 

 

Phase I. The objective of Phase I is to establish the technical merit, feasibility, and 
commercial potential of the proposed R&D efforts and to determine the quality of 
performance of the small business awardee organization prior to providing further Federal 
support in Phase II. SBIR Phase I awards normally do not exceed $150,000 total costs for 6 
months. 

Phase II. The objective of Phase II is to continue the R&D efforts initiated in Phase I. Funding 
is based on the results achieved in Phase I and the scientific and technical merit and 
commercial potential of the project proposed in Phase II. Only Phase I awardees are eligible 
for a Phase II award. SBIR Phase II awards normally do not exceed $1,000,000 total costs 
for 2 years. 

Phase III. The objective of Phase III is for the small business to pursue commercialization 
objectives resulting from the Phase I/II R&D activities but the SBIR program does not fund 
Phase III.  

Side - Type - Interactions  

Demand  side-  Public  procurement;  need  specified  by  a  public  demand.  Supply:  grant  for  the 
winners (rather than purchase of a product).  

Interactions with demand/supply side  

The  SBIR  is  a  public  procurement  program  for  small  firms  where  SMEs  receive  funding  up  to  the 
commercialization stage. The SBIR programme offers professional assistance to companies in order 
to seek advice  and services from  an external  consultant. The external consultant is often used to 
provide  the  applicant  with  an  assessment  of  their  proposal  and,  most  often,  especially  assist  the 
small  business  with  technology  commercialization  assistance,  in  order  to  improve  their 
commercialization  strategy.  The  commercialization  plan  is  a  very  important  part  of  the  SBIR 
programme, as the programme’s ultimate priority is to bring to market new technological solutions 
in  which  the  nation  is  in  need.  More  recently,  some  federal  agencies  have  been  experimenting 
funding firms beyond phase II to help them develop their project at a sufficient level for interest by 
third parties.  

Note that:  

Some US federal government agencies organise the SBIR program mainly as a grant scheme (so-
called  "granting"  agencies).  Other  US  federal  government  agencies  -  mainly  those  with  large 
operational responsibilities and thus large procurement needs - implement the SBIR program as a 
procurement scheme (so-called "contracting" agencies). The granting agencies let companies make 
the  specifications  for  concrete  project  proposals  in  broadly  defined  areas  of  interest  to  the 
agencies.  The  contracting  agencies  define  more  concrete  problems  to  be  addressed  and 
performance targets to be met. 

Assessment of impacts  

Several evaluations have been carried out of the SBIR programme, showing that SBIR awards have 
had a positive effect caused by the creation of new firms, with positive benefits in employment and 
growth  for  the  local  economy8.  Some  studies  have  also  given  evidence  that  SBIR  awardees  grew 
significantly  faster  in  terms  of  employment  and  growth  and  were  more  likely  to  attract  venture 
financing than comparable firms9. 

8  

9  

The  Small  Business  Innovation  Research  Program:  An  Assessment  of  the  Department  of  Defense  Fast 
Track  Initiative(2000),  National  Research  Council,  Charles  W.  Wessner,  ed.  Washington,  D.C.  National 
Academy Press 

The Government as Venture Capitalist: The Long-run Impact of the SBIR Program (1999), by Lerner, J. 
Harvard University and National Bureau of Economic Research Journal of Business, vol.72, no.3. 

23 

 
 
 
 
                                                 
Metrics/indicators 

The  National  Research  Council  carried  out  an  assessment  of  the  Small  Business  Innovation  and 
Research (SBIR) programme  from  2001 to  2009.  This comprised a general survey,  and particular 
surveys  by  the  five  government  departments  that  account  for  96%  of  SBIR  programme 
expenditures10.  Regarding  commercialization,  the  NRC  assessment  concluded  that  the  SBIR 
programme  has  a  strong commercial  focus,  with  considerable  efforts  to  bring  projects to  market, 
which  has  known  some  success.  Products  come  to  market  quickly  and  approximately  30-40%  of 
projects generate products that reach the marketplace. 65% of companies involved make business 
from their SBIR development within 1 year. 

Audretsch et al. (2001) estimated the expected sales for each SBIR project on the basis of actual 
sales realised until 1999 from 112 DoD-funded Phase II SBIR projects. Average actual sales were 
$175 021 per project, which reflected the large number of firms with no actual sales (78 out of 112 
made  no  sales  of  their  product).  However,  when  the  sample  was  limited  to  the  34  projects 
reporting  sales,  the  average  increased  to  $575  539  per  project.  The  study  concluded  that  if  the 
SBIR programme did not exist, the probability of these projects reaching the Second Phase would 
be very limited, showing the strong positive impact of the SBIR programme. 

Metin Ege in his thesis on “How do grants influence firm performance? An econometric evaluation 
of the SBIR programmes at NIH” (2009) compared two samples of data, a test and a control one in 
order to check the effect of the SBIR programme on the average sales growth for the NIH projects 
for three, five and eight years. The results demonstrated at 1 % significance level that the average 
sales  growth  was  higher  in  the  groups  of  Phase  II  awardees  than  the  non-recipients  group.  The 
sales growth of the SBIR firms reached 18, 13 and 8 % in three, five and eight years respectively. 
At the same time, the non-SBIR firms demonstrated a growth of 8, 7 and 5 %. 

Regarding  SBIR  effects  on  employment,  the  NRC  survey  sought  detailed  information  about  the 
number of employees at the time of the award and at the time of the survey and about the direct 
impact  of  the  award  on  employment.  Overall,  the  survey  data  showed  that  the  average 
employment  gain  at  each  responding  firm  from  the  date  of  the  SBIR  award  to  the  time  of  the 
survey  was  29.9  full-time  equivalent  employees.  The  NRC  Phase  II  Survey  also  showed  that 
respondents  enjoyed  strongly  positive  employment  growth  after  receiving  a  Phase  II  award.  The 
percentage of companies with at least 50 employees more than doubled, from 16.5 % to 35.4 % of 
all  respondents.  Overall,  survey  respondents  reported  gains  of  57,808  full  time  equivalent 
employees, with the top five respondents accounting for 18.4 % of the overall net gain. The NRC 
survey also sought to directly identify employment gains that were the direct result of the award. 
Respondents estimated that specifically as a result of the SBIR project, their firm was able to hire 
an average of 2.4 employees, and to retain 2.1 more.  

In the econometric evaluation of the SBIR at NIH (Ege 2009) the author compared two samples of 
data  in  the  same  way  as  described  above  for  sales  growth  to  check  the  effect  of  the  SBIR 
programme  on  the  average  employment  growth  for  the  NIH  projects  for  three,  five  and  eight 
years.  The  results  demonstrated  at  1  %  significance  level  that  the  average  employment  growth 
was  higher  in  the  groups  of  Phase  II  awardees  than  the  non-recipients  group.  The  employment 
growth of the SBIR firms reached 16, 15 and 10 % in three, five and eight years respectively. At 
the same time, the non-SBIR firms demonstrated a growth of 6, 4.4 and 4 %. 

As for its impact on growth, all the respondents to the NRC survey declared that a large share of 
their company growth  was attributable to  their  SBIR awards.  In 44% of cases SBIR awards were 
credited with over 50% of company growth. Ege in his thesis concluded that the programme had a 
measurable impact on sales and employment growth for the companies involved.  

Policy lessons 

The  SBIR  programme  is  often  taken  as  a  model  for  promotion  of  innovation  and  commercial 
application  of  new  technologies  and  a  large  number  of  successful  US  companies    owe  their  initial 
success to SBIR contracts. As mentioned in the previous section above, several evaluations of the 
SBIR programme have taken place and have shown that SBIR awards have caused the creation of 
new  firms,  with  positive  benefits  in  employment  and  growth  for  the  local  economy.  The  SBIR-
programme  has  thus  proven  to  be  successful  in  the  United  States  for  enabling  small  business  to 
develop technical innovation attracting third party interest (whether public or private).  

10  

The  Department  of  Defence  (DoD)  (the  SBIR  programme  at  DoD  is  the  largest  of  all  the  SBIR 
programmes,  and  accounts  for  over  half  the  programme’s  funding),  the  National  Institutes  of  Health 
(NIH), the National Aeronautics and Space Administration (NASA), the Department of Energy (DoE), and 
the National Science Foundation (NSF). 

24 

 
 
                                                 
Its main strengths are the following11: 

 

 

 

 

 

 

 

 

 

 

 

 

Encourages novel research: it has a high-risk focus and projects involve novel research, 
rather than incremental change. 

Catalyst for employment and sales growth: the programme has had positive effects for 
award-winning firms in terms of employment and sales growth. 

Certification: SBIR facilitates links with angel and venture capital investments – awards play 
an important role in certifying firm quality as they validate technology concept and 
commercialisation. 

External links: SBIR provides a bridge between universities and the marketplace; an 
important percentage of SBIR awards involve university researchers. 

Size and breadth: the size and broad spectrum of the programme mean that support is 
distributed to a wide number of different firms, of which nearly a third are new to the 
programme each year. 

Flexibility: the programme allows to meet different mission needs of the government 
agencies. 

  However, there are also some risk factors that have been identified and that need to be 
taken into account:  

Risk of non-additionality: awards crowd out firm-financed R&D instead of increasing R&D 
activities or employment; they therefore only transfer costs of commercial R&D to the 
government12. 

Lobbying: serial participation of un-achieving firms whose probability of winning an award is 
strongly increased by relationships with federal officials (“SBIR mills”). 

Lack of motivation and evaluation: many government agencies can regard SBIR as a “tax” 
on their programmes and will not invest time in choosing the award-winners and follow-up 
on programme outcomes. 

Length of the application process: long cycle time between the application phase, and phase 
I and phase II awards, can be an issue for small firms with constrained monthly cash flow. 

In addition, one of the main criticisms of the SBIR programme in the United States, has been 
that it tends to only develop a technology to a certain readiness level. Most 
commercialisation successes require substantial post-SBIR research and funding from a 
variety of sources and although the results of a survey carried out indicated that 56% of the 
surveyed projects managed to attract additional funding, many award-winning firms have 
stressed the difficulties in obtaining funding for the commercialisation phase (Phase III). 
Some federal agencies have been experimenting funding firms beyond phase II to help them 
develop their project at a sufficient level for interest by third parties. 

11  

12  

Sources  for  this  section:  Public  procurement  programmes  for  small  firms  –  SBIR-type  programmes 
(2010),  OECD;  “Secrets”  of  the  world’s  largest  seed  capital  fund:  How  the  United  States  Government 
uses  its  Small  Business  Innovation  Research  (SBIR)  Programme  and  Procurement  Budgets  to  Support 
Small Technology Firms (2006) by David Connell Centre for Business Research, University of Cambridge. 

Econometric evaluation of the SBIR programme in the United States has raised some doubts about the 
success of  the  programme,  pointing  to  risk of  non-additionality  of  SBIR funds.  Data  showed  that  SBIR 
awards  a)  did  not  lead  to  an  increase  in  employment  in  firms  and  b)  appeared  to  crowd  out  private 
money that companies previously spent on R&D (Wallsten, 2000). 

25 

 
 
 
 
                                                 
References 

  Public/Private  Technology  Partnerships:  Evaluating  SBIR-Supported  Research  (2001)  by  David 
B. Audretsch (Institute for Development Strategies), Albert N. Link (Department of Economics-
University  of  North  Carolina)  and  John  T.  Scott  (Department  of  Economics  Dartmouth  College 
Hanover) 

  An  Assessment  of  the  Small  Business  Innovation  Research  Program    (2008)  by  Charles  W. 
Wessner, Editor,  Committee  on  Capitalizing on Science, Technology, and Innovation;  National 
Research Council http://www.nap.edu/catalog/11989.html 

  Public  procurement  programmes  for  small  firms  –  SBIR-type  programmes  (2010),  OECD 

Innovation Policy Platform www.oecd.org/innovation/policyplatform 

  “Secrets” of the world’s largest seed capital  fund: How the United States Government uses  its 
Small  Business  Innovation  Research  (SBIR)  Programme  and  Procurement  Budgets  to  Support 
Small  Technology  Firms  (2006)  by  David  Connell  Centre  for  Business  Research,  University  of 
Cambridge.  

  Success stories in the SBIR official web-site: http://www.sbir.gov/success-stories 

  http://www.nap.edu/openbook.php?record_id=11989&page=8 

  The  Government  as  Venture  Capitalist:  The  Long-run  Impact  of  the  SBIR  Program  (1999),  by 
Lerner,  J.  Harvard  University  and  National  Bureau  of  Economic  Research  Journal  of  Business, 
vol.72, no.3. 

  Study on pre-commercial procurement in the field of Security Within the Framework Contract of 
ECORYS 

Security 
2011, 
http://ec.europa.eu/enterprise/policies/security/files/doc/pcp_sec_finalreport_en.pdf 

ENTR/09/050 

November 

Studies 

report, 

Final 

– 

  The  Effects  of  Government-Industry  R&D  Programmes  on  Private  R&D:  The  Case  of  the  Small 
Business  Innovation  Research  Program  (2000)  by  Wallsten,  S.  in  Rand  Journal  of  Economics, 
Vol. 31, N°1 (Spring 2000). 

  The  Small  Business  Innovation  Research  Program:  An  Assessment  of  the  Department  of 
Defense  Fast  Track  Initiative(2000),  National  Research  Council,  Charles  W.  Wessner,  ed. 
Washington, D.C. National Academy Press.  

  Ege (2009). How Do Grants Influence Firm Performance? An Econometric Evaluation Of The Sbir 
Program  At  NIH.  Thesis  submitted  to  the  Graduate  School-New  Brunswick  Rutgers,  The  State 
University of New Jersey.  

26 

 
 
 
 
 
C.2.  German (solar) Panel Policy (Renewable Energy Heating Act and Market Incentive 

Programme) 

Policy Name 
and URL 

Renewable Energy Heating Act and Market Incentive Programme (MAP) 
http://www.res-legal.eu/search-by-country/germany/  
http://energytransition.de/2012/10/renewable-energy-heating-act-and-
market-incentive-program-map/  

Promoting 
Institution 

Federal  Ministry  for  Economic  Affairs 
and Energy (BMWi) 
German federal Agency:  
Federal  Office  of  Economics  and 
Export Control (BAFA) 

Country 
(Region) 

Germany 

Level of 
involvement 

National 

Key characteristics 

The  Renewable  Energy  Heating  Act  and  Market  Incentive  Programme  seeks  to  foster  the 
development of the sector of renewable energies by specifically encouraging the use of renewable 
energies  in  heating  processes,  with  the  overall  objective  to  increase  the  share  of  renewable 
energies of 14 % in the heating market by 2020 (in 2012, the part of RES in heating supply was  
10%). 

The Renewable Energy Heating Act (EEWärmeG) was created in 2009 with the triple goal to oblige 
the  use  of  renewable  energies  in  new  buildings,  to  provide  financial  support  to  building  owners 
modernising  heating  systems  and  to  facilitate  the  expansion  of  the  heating  grid.    It  therefore 
sought to interact on both supply and demand factors. 

In  fact,  the  EEWärmeG  obliges  owners  of  new  constructed  buildings  to  have  a  certain  amount  of 
renewable energy in heating processes. Besides, the EEWärmeG now includes an important policy 
instrument: the Market Incentive programme.  

The Market Incentive Programme (MAP) was originally launched in 2000, as part of the support of 
Renewable Energy Resources in Heating processes (RES-H) in Germany. It is now part of the 2009 
EEWärmeG  and  only  supports  already  existing  buildings.  The  MAP  supports  Renewable  Energy 
technologies (such as solar heating installations, wood pellet stoves, and efficient heat pumps).  

Everyone  investing  in  RES  heating  processes  can  be  a  beneficiary  of  the  measure:  private 
individuals,  independent tradesmen,  non-profit  organisation,  municipalities  and  enterprises.  Large 
companies  can  also  be  beneficiaries  (under  special  conditions),  as  well  as  energy-service 
enterprises.  

The MAP includes two different support programmes applying to beneficiaries according to the size 
and  type  of  the investment,  funded  either  by  the  Federal  Office  of  Economics  and  Export  Control 
(BAFA)  or  by  the  German  government-owned  development  bank,  the  KfW.  Both  measures  have 
been funded up till  2013 with around €500 million a year.   

  Investment grants (BAFA-Support) concern smaller installations and is mostly conducted by 

private investors in family houses. (Note that BAFA investment support is given for heat 
produced in existing buildings but installations in new buildings are eligible if process heat is 
used). 13 measures are granted through this means, granting owners with lump sum amounts 
(at least 1300€ for a heating pump, with a possible bonus) or a percentage (for example 36 
€/kW for a biomass installation).  

In 2013, the Grant measures (BAFA-Support) supported a total of 71 172 installations, foremost 
solar, biomass and heat pumps in existing family houses: 35 979 Biomass heating systems, 30 
204 Solar thermal collector, 5 349 heat pumps and 595 installations to visualisation of the gains 
obtained  through  the  use  of  RE.  The  percentage  of  new  demands  for  BAFA-subsidies  was  in 
2013  18%  superior  than  2012  (79  203  against  66  920  new  demands).  In  2013,  MAP  Grant 

27 

 
 
 
measures  represented  public  support  of  321  million  euro  and  triggered  1,23  billion  euro 
investment by the grant beneficiaries . This represents a clear increase  compared to the  2012 
and 2011 periods.  

  With loans measures (KfW-Support), KfW provides low-interest loans with grant payback 

support for the development and expansion of heat installations/plants. This applies to 
investment in larger heating solutions (for example solar installations from 40 m², Biomass 
installations above 100 kW, efficient heating pumps from 100 kw, Biogas, local heating network 
and heat storage facilities for heat from renewable energy as well as  mine water projects – 
mainly realised in commercial and communal domain).. 

Regarding  the  loan  part  (KfW-support)  of  the  MAP  for  constructions  in  larger  service  types  as 
well as for heating network and heat-storage devices (recharged with RE), 2 695 project loans  
representing 289 million euro have been given. Heating networks are here the most important 
investment with 1 677 loans (representing 191 million euro), followed by biomass installations 
(705  loans),  heat  storage  devices  (190  loans)  and  solar  thermal  installations  (59  loans).  In 
2013,  the  KfW  loan  supply  part  of  the  policy  represented  also  2  093  new  demands.  This  is  a 
lower level than 2012, where it represented 2 336 demands.13 Nonetheless, the entire available 
budget has been used in 2013. 

Note that owners have to choose between the two kinds of support measures.  

Side-type interactions 

The rationale of the policy aims at supporting the demand for RES by citizens and public structures, 
through several instruments:  

 

 

 

Through the EEWärmeG and the obligation for new building owners to include a part of RE in 
the heating systems, one can talk about regulation of demand (the aim is to create a 
market; process and “usage” norms) 

Through the Market Incentive Programme designed to have building owner invest in RE, 
there is a private demand policy: Direct/financial support (demand subsidies)  

One can also see an Indirect/soft steering support through the PR campaigns aimed at 
informing people about the policy. 

Interactions with demand/supply side 

This policy is thus addressing foremost demand side via the support of investment for all kinds of 
property owners and investors.  

The figure below illustrates the different demand side factors linked to this policy action. 

13  

http://www.erneuerbare-energien.de/die-themen/foerderung/marktanreizprogramm/ 

28 

 
 
 
 
                                                 
Assessment of impacts 

According  to  the  2010  evaluation,  the  total  Funds  in  2010  reached  €265  million,  while  the  funds 
actually  used  represented  €115  million  (due  to  the  economic  crisis  of  2010).  Those  investments 
triggered €844 million of private investments, about €150 million tax revenues and positive effects 
on  employment.14  The  Heinrich  Böll  Foundation  thus  declares:  “Every  euro  spent  here  generates 
more than 7 euros in private investments”15 

The  German  renewable  energy  market  increased  and  continues  to  increase.  According  to  a  MAP 
policy  evaluation  from  2010  on  2009  actions,  the  policy  has  had  an  overall  positive  effect on  the 
demand  for  RES  in  Germany.  As  a  matter  of  fact,  it  is  estimated  that  70%  of  German  RES 
installations  are  given  grants  by  the  MAP:  80%  in  Biomass  domain,  45%  of  heating  pumps  and 
80% of solar energy. The incentive effect of MAP is illustrated by the fact that 50% of beneficiaries 
declare they would not have invested – or only partially – without the MAP measures.  This figure 
suggest that policy mix is clearly having an impact on the supply side  i.e. increasing the provision 
of  housing  built  or  renovated  with  the  use  RE  and  is  having  an  impact  on  the  suppliers  of  RE 
equipment. 

MAP  measures  beneficiated  mostly  to  German  producers:  80%  of  solar  industry  MAP  investment 
address German production, as well as 65% in heating pumps sector. 

Besides,  the  evaluation  report  gives  an  estimation  of  the  part  of  MAP-induced  workers  in  the 
RES labour market: this represents 60 % in solar energy domain, 12 % in heating pumps and 8 % 
in biomass domain.  

Policy lessons 

The  support  programme  for  Renewable  Energy  in  heating  systems  in  Germany  can  be  divided  in 
two major parts: the investment grants concerning foremost private owners and loans incentives, 
concerning larger installations such as enterprises or municipalities.  

14  

http://www.solarordinances.eu/LinkClick.aspx?fileticket=XOpuYPRZXVo%3D&tabid=423 

15  

http://energytransition.de/2012/10/renewable-energy-heating-act-and-market-incentive-program-map/  

29 

 
 
 
                                                 
The evaluation reports state that the implemented measures have reached their goal of improving 
the RES sector for heating systems.  

The major strengths of the policy are the following:  

 

 

 

 

The obligation of a percentage of Renewable Energies for new buildings is seen as 
particularly efficient. Most MAP beneficiaries are owners of new buildings.  

Besides, the BAFA-funded grants for private users are a success, as the number of MAP 
beneficiaries increases since the launch of the policy.  

The 2010 evaluation report shows that the sector of RES heating is also expanding without 
MAP grants – this can be explained through the fact that the MAP has “prepared the ground” 
by changing housing of building constructors approach and the desire of consumers to use 
RE, for an even larger expansion of RES. 

German RES equipment producers seem to have taken especially advantage of the MAP 
measures, as much of the increasing demand goes to domestic producers.  

However, there are also some weaknesses:  

 

 

The sustainability of the MAP financial measures can be put on hold by  policy-makers  – as 
was the case during  the economic crisis, the incentive measures were frozen  in May 2010 
(and launched again in July 2010), which slowed down the whole policy.  

Moreover, one can observe that the number of KfW-funded loans is lightly decreasing, which 
can be seen as a failure in terms of the long-term policy. However, this is balanced by the 
increase of BAFA grants.  

References 

Contact details of key person for this policy:  
Mr. Wagner, solar@bafa.bund.de Tél: +496196 908 301  

Policy documents, evaluation reports and studies 

 

 

 

 

 

Heizen mit Erneuerbaren Energien: 
http://www.bafa.de/bafa/de/energie/erneuerbare_energien/index.html 

Marktanreizprogramm für erneuerbare Energien im Wärmemarkt (MAP): 
http://www.erneuerbare-energien.de/die-themen/foerderung/marktanreizprogramm/ 

Marktanreizprogramm für erneuerbare Energien im Wärmemarkt (MAP): 
http://www.erneuerbare-energien.de/die-
themen/foerderung/marktanreizprogramm/?type=98 

Förderung im Marktanreizprogramm 2014 (Tab) http://www.erneuerbare-
energien.de/fileadmin/Daten_EE/Dokumente__PDFs_/map_2014_foerderung_bafa.pdf  

Evaluation: http://www.ifeu.de/energie/pdf/FICHT-6825484-v1-
Evaluierung_MAP_09_final.pdf (See pp. 122 ff.) 

30 

 
 
 
 
 
C.3.  Smart Grid technology Standardisation  

Policy Name 
and URL 

Smart  Grid  technology  standardisation  -  Smart  Grid  Interoperability 
standards and regulation 

Promoting 
Institution 

National Institute of Standards and 
Technology 

Country 
(Region) 

USA 

Level of 
involvement 

Smart  Grid  Interoperability  standards  and  regulation  are  based  on  national 
legislation,  the  legislation  links  with  all  states  and  territories  and  their  regulatory 
agencies.  

Key characteristics  

The National Institute of Standards and Technology has the primary responsibility to coordinate the 
development of a framework to achieve interoperability of Smart Grid devices and systems under 
the Energy Independence and Security Act 2007.  

Rationale 

Smart  Grid  is  a  vital  component  of  President  Obama’s  comprehensive  energy  plan  which  aims  to 
reduce dependency on foreign oil, create jobs and help the US industry to compete successfully on 
the global market for clean energy technology.16 

Aim 

Interoperability  standards  will  underpin  the  performance,  capabilities,  and  benefits  of  the  Smart 
Grid, they will enable the networked devices and systems that make up the envisioned Smart Grid 
to communicate and work with each other.17 

Objectives 

The  framework  developed  by  the  National  Institute  of  Standards  and  Technology  will  achieve 
interoperability  of  Smart Grid  devices  and  systems,  it  includes  protocols  and model  standards  for 
information management. These protocols and standards are urgently needed as without standards 
there  is  the  potential  for  technologies  moving  beyond  the  pilot  stage  and  into  large-scale 
development  to  become  obsolete  prematurely  or  to  be  implemented  without measures  necessary 
to ensure security. The lack of standards may also hinder future innovation and the implementation 
of  promising  applications,  such  as  smart  appliances  that  are  responsive  to  price  and  demand 
response signals.18 

Costs 

It  is  estimated  that  the  US  energy  industry  is  investing  at  least  $400  billion  to  revamp  and 
modernise  the  electricity  system  and  to  develop  as  digital  security  system  to  protect  from  cyber 
terrorism.19  

Details about the cost of developing and implementing standards are not available. 

Side - Type - Interactions  

The  demand  side  policy  will  implement  standards  and  regulations  for  technology,  supply  side 
measures are also in place to further the development of various Smart Grid elements. 

16  

National Institute of Standards and Technology, U.S. Department of Commerce, 2010 

17  

National Institute of Standards and Technology, U.S. Department of Commerce, 2010 

18  

National Institute of Standards and Technology, U.S. Department of Commerce, 2010 

19  

http://www.sgip.org/About-SGIP 

31 

 
 
 
 
 
                                                 
Interactions with demand/supply side  

Demand side 

The Energy Independence and Security Act defines the development of a Smart Grid as a national 
policy  goal  and  instructs  that  the  interoperability  framework  should  be  flexible,  uniform  and 
technology  neutral.  The  framework  should  ensure  traditional,  centralised  generation  and 
distribution  resources  can  be  used  and  at  the  same  time  guarantee  that  new,  innovative  Smart 
Grid technologies, such as distributed renewable energy resources and energy storage, can also be 
utilised. 

The National Institute of Standards and Technology has developed a three-phase plan to speed up 
the identification of an initial set  of  standards  and to  put in place a robust framework that allows 
for the development of additional standards that will be needed as well as providing a conformity 
testing and certification infrastructure. The three phases are: 

 

 

 

Engagement of stakeholders in a participatory public process to identify applicable standards 
and requirements, and gaps in currently available standards, and priorities for additional 
standardisation activities, 

Establishing a Smart Grid Interoperability Panel forum to drive longer-term progress, 

Development and implementation of a framework for conformity testing and certification. 

It is expected that the Smart Grid will ultimately require hundreds of standards, specifications and 
requirements.  Where  practical,  Smart  Grid  interoperability  standards  should  be  developed  and 
implemented internationally. Initially, the National Institute of Standards and Technology identified 
eight priority areas: 

 

 

 

 

 

 

 

 

Demand Response and Consumer Energy Efficiency  

Wide-Area Situational Awareness  

Energy Storage  

Electric Transportation  

Advanced Metering Infrastructure  

Distribution Grid Management  

Cyber Security  

Network Communications  

According to the Energy Independence and Security Act the Federal Energy Regulatory Commission 
(FERC)  is  charged  with  initiating  rulemaking  proceedings,  and  once  sufficient  consensus  is 
achieved,  adopting  the  standards  and  protocols  necessary  to  ensure  Smart  Grid  functionality  and 
interoperability in interstate transmission of electric power and in regional and wholesale electricity 
markets. 

The National Institute of Standards and Technology feels that Smart Grid interoperability standards 
should be open and should be developed and maintained through a collaborative, consensus-driven 
process  in  which  all  relevant  parties  can  participate  and  not  controlled  or  dominated  by  a  single 
organisation or group of organisations.  

The Smart Grid Interoperability Panel was formed to provide a permanent organisational structure 
that supports and ongoing consensus process enabling the continuing evolution of the framework. 
The  Smart  Grid  Interoperability  Panel  is  a  public-private  partnership,  formed  in  November  2009. 
The  Smart  Grid  Interoperability  Panel  also  encompasses  a  permanent  testing  and  certification 
committee. 

It  is  thought  that  this  process  which  supports  ongoing  Smart  Grid  innovation  could  lead  to  new 
collaborative  methods  and  vehicles  for  developing  and  implementing  standards  in  technology-
based markets. This would especially be the case during the early phases, when standards or the 
lack of standards can strongly influence the course of technology development and adaptation and 
the growth and competitiveness of sectors. 20 

Supply side 

The  Department  of  Energy  (DOE)  leads  the  overall  federal  Smart  Grid  effort  and  implements  a 
number  of  programmes  such  as  Smart  Grid  Investment  Grants  and  other  initiatives  such  as  loan 
guarantees for renewable energy generation projects to further the development of various Smart 

20  

National Institute of Standards and Technology, U.S. Department of Commerce, 2010 

32 

 
 
                                                 
Grid  elements,  including  smart  sensors  on  distribution  lines,  smart  meters  in  homes,  and  widely 
dispersed sources of renewable energy.21 

Assessment of impacts  

Evaluations  detailing  impact  are  available  for  individual  supply  side  projects  contributing  to  the 
development of  Smart  Grid  on  the  SmartGrid.gov  website.  It  is  too  early  to  assess  the  impact of 
the framework for Smart Grid Interoperability Standards. 

Metrics/indicators  

Rationale 

Modernisation of the electric power grid is central to the USA’s efforts to increase energy efficiency, 
transition  to  renewable  energy  sources,  reduction  of  greenhouse  gas  emissions  and  building  a 
sustainable  economy  that  ensures  prosperity  for  current  and  future  generations.  An  advanced 
power grid relies on adding and integrating many varieties of digital computing and communication 
technologies and services with the power-deliver infrastructure, a ‘Smart Grid’.  

It is expected that Smart Grid Interoperability standards will help to enable economies of scale and 
scope that will help to create competitive markets in which providers compete on price and quality. 
Competition will increase and speed up the take up of Smart Grid technologies and provide benefits 
for customer. 22 

Monitoring and evaluation 

The  Framework  and  Roadmap  for  Smart  Grid  Interoperability  Standards  is  being  regularly 
reviewed,  the  first  version  was  published  in  January  2010,  the  second  version  of  the  framework 
was  released  in  February  2012  and  in  May  2014  the  draft  of  the  third  release  was  published  for 
public comments.23 

Evaluations  of  individual  projects  contributing  to  the  development  of  Smart  Grid  are  available  on 
the SmartGrid.gov website. 

Policy lessons 

Policy  lessons  for  individual  projects  contributing  to  the  development  of  Smart  Grid  may  be 
available  within  the  evaluation  of  these  projects,  these  are  published  on  the  SmartGrid.gov 
website.  To  date  there  has  been  no  report  on  policy  lessons  from  the  framework  for  Smart  Grid 
Interoperability Standards. 

References: 

Contact  details  of  key  person(s)  for  this  policy:  Smart  Grid  National  Coordinator  General 
Information: 
  Phone: 301-975-5987 
  Email: smartgrid@nist.gov 

Policy documents, evaluation reports and studies 

 

 

 

National Institute of Standards and Technology, U.S. Department of Commerce (2010) NIST 
Framework  and  Roadmap 
for  Smart  Grid  Interoperability  Standards,  Release  1.0  
http://www.nist.gov/public_affairs/releases/upload/smartgrid_interoperability_final.pdf  

Office of the National Coordinator for Smart Grid Interoperability, Engineering Laboratory in 
collaboration with Physical Measurement Laboratory and Information Technology Laboratory 
(2012)  NIST  Framework  and  Roadmap  for  Smart  Grid  Interoperability  Standards,  Release 
2.0 http://www.nist.gov/smartgrid/upload/NIST_Framework_Release_2-0_corr.pdf  

Smart Grid and Cyber-Physical Systems Program Office and Energy and Environment 
Division, Engineering Laboratory in collaboration with Physical Measurement Laboratory and 
Information Technology Laboratory (2014) NIST Framework and Roadmap for Smart Grid 

21  

National Institute of Standards and Technology, U.S. Department of Commerce, 2010 

22  

National Institute of Standards and Technology, U.S. Department of Commerce, 2010 

23  

http://www.nist.gov/smartgrid/index.cfm 

33 

 
 
 
                                                 
Interoperability Standards, Release 3.0 (Draft) http://www.nist.gov/smartgrid/upload/Draft-
NIST-SG-Framework-3.pdf  

 

 

 

National Institute of Standards and Technology, website: 
http://www.nist.gov/smartgrid/index.cfm  

Smart Grid Interoperability Standards Panel website: http://www.sgip.org/ 

National Institute of Standards and Technology (no date) Smart Grid: A Beginner's Guide 
http://www.nist.gov/smartgrid/upload/SmartGrid_guide.pdf 

34 

 
 
 
 
C.4.  Health Information Technology for Economic and Clinical Health (HITECH) Act 

Policy 
Name  and 
URL 

Health  Information  Technology  for  Economic  and  Clinical  Health  (HITECH) 
Act 
http://www.healthit.gov/   

Country 
(Region) 

USA 

Promoting 
Institution 

Level of 
involvement 

US  Department  of  Health  and  Human 
Services  (launched,  administrate  and  fund 
the programme). 
The  programme  is  managed  under  the 
auspices  of  a  Office  National  Coordinator 
(ONC)  for  Health  Information  Technology 
within  the  US  Department  of  Health  and 
Human Services. 
National 

Key characteristics  

The  HITECH  Act  is  a  programme  composed  of  different  incentives  and  regulations  designed  to 
accelerate the adoption of health information technology (HIT) by the health care industry, health 
care providers, consumers, and patients. Its goal is to enable improvements in health care quality, 
increase  affordability,  and  improve  health  care  outcomes  for  all  Americans.  The  programme  has 
been deployed since 2009 and is expected to end in 2017. The objective is to promote the adoption 
of  electronic  medical  records  (EMR)  to  enhance  medical  service  delivery.  The  overall  programme 
targets the entire ecosystem from care providers and professionals to patients, including also policy 
researchers and implementers.  

The  rationale  of  the  policy  is  to  build  the  best  conditions  to  promote  the  adoption  of  EMR  by 
addressing  issues  encountered  by  the  different  stakeholders,  such  as  privacy  issues  for  patients, 
cost considerations for care providers etc.  

Among  the  measures  undertaken  under  the  programme,  the  most  emblematic  are  the  Medicare 
and Medicaid Electronic Health Care Record (EHR) Incentive Programmes which consist in providing 
eligible care providers (eligible professionals, eligible hospitals, and critical access hospitals (CAHs)) 
with annual incentive payments over a four to six year period as they adopt, implement, upgrade 
or demonstrate meaningful use of certified EHR technology. 

The  eligible  providers  apply  to  the  programme  and  their  selection  is  preconditioned  to  the  use  of 
certified EMR technology. They also must show “meaningful use” of the technology which is defined 
as a baseline for the use of core measures such as maintaining an active medication list and “menu 
set”  (i.e.,  objectives  that  can  be  chosen  from  a  larger  list)  measures  such  as  sending  patient 
reminders  (Stage  1).  Two  further  stages  are  foreseen,  and  will  focus  on  further  expansion  of  the 
baseline.  In  addition,  these  providers  must  report  clinical  quality  measures  to  be  eligible  for  the 
incentives. 

In addition, several programmes have been established to support this system: 

 

 

 

The Beacon Community Program offers grants to create pilot health information 
technology efforts in communities.  

State health information exchanges are supported through a grant programme. The 
Health Information Technology Extension Program is set up to provide localised technical 
assistance to clinics and hospitals throughout the US. 

Training and workforce development programmes are offered through grants to 
support community college consortia, curriculum development centres, university based 
training, and competency examination administration. 

Side - Type – Interactions 

The policy combines a mix of demand-side approaches targeting the various stakeholders involved 
to  promote  the  EMR  (care  providers,  users,  and  policy  makers),  via  direct  incentives  to  foster 
demand. Nevertheless, a systemic approach is implemented via the  conditional supporting of care 
providers based on certified technology and implementation of the meaningful use. 

35 

 
 
 
 
Interactions with demand/supply side  

This policy addresses through different manners the various stakeholders involved in the adoption 
of  the  EMR.  The  policy  integrates  a  systemic  approach  combining  several  demand  side  logics.  In 
particular,  the  meaningful  use  that  should  be  demonstrated  by  physicians  and  hospitals  obliges 
beneficiaries  to  implement  several  related  standards  measures,  and  not  only  adopt  the  EMR 
technology.  

Even  though  the  policy  doesn’t  target  directly  the  supply  side,  other  related  programmes  target 
specifically  supply  side  factors,  e.g.  the  SHARP  programme  which  supports  advanced  research 
activities to address key short- and long-term challenges to the implementation of HITECH and its 
programmes.  SHARP  focuses  on  solving  currently  known  and  anticipated  challenges  to  adoption 
and the meaningful use of health IT. These granted projects focus on areas ripe for “breakthrough” 
advances,  e.g.  potential  security  issues.  The  goal  of  the  programme  is  to  close  the  gap  between 
the promise of health IT and its realized benefits in critical areas. The SHARP Principal Investigators 
have designed and dedicated the projects to support the goals of HITECH and overcoming health IT 
challenges to adoption and the meaningful use of health IT. 

Assessment of Impacts  

The HITECH act is intensively monitored and assessed across all its various programs. The aim of 
these evaluations is mainly to identify good practices, conditions of success and lessons learnt from 
the implementation of the programme.  

In  October  2013  the  CMS  incentive  programme  report  showed  that  active  registrations  included 
286,771  Medicare  eligible  professionals,  139,490  Medicaid  eligible  professionals,  and  4,642 
hospitals,  yielding  a  total  of  430,903  active  registrations  that  were  fully  completed  by  October 
2013. 

Results of the evaluation show a large adoption of basic EHR systems by hospitals, increasing more 
than five-fold between 2008 and 2013. In 2013, nearly six in ten (59%) hospitals have adopted at 
least  a  Basic  EHR  system  -  an  increase  of  34%  from  2012  to  2013.  Over  nine  in  ten  (93%) 
hospitals  possessed  a  certified  EHR  technology  in  2013,  an  increase  of  29%  since  2011. 
Furthermore, by 2012 84% of individuals either strongly agree or agree that health care providers 
have  measures  in  place  that  provide  reasonable  protections  for  EHRs.  In  addition,  at  the  end  of 
2012, over 400 vendors provided CEHRT products used for MU attestation and current figures are 
showing an increased positive trend. 

These  figures  suggest  that  the  programmes  are  on  track  to  deliver  expected  impacts  and,  in 
particular,    are  establishing  the  framework  conditions  for  a  dialogue  between  the  different 
stakeholders, by addressing specific issues they faced (such as privacy for patients for instance).  

Metrics/indicators  

 

What is the rationale for public intervention? 

Several goals are pursued with the policy addressing  different beneficiaries. First, the policy aims 
at  improving  the  overall  care  system  for  all  Americans  based  on  the  expected  benefits  of  HER 
system. But the policy also aims at contributing to the acceleration of economic recovery.  

Among  issues  identified  in  the  US  health  care  systems,  the  cost  of  delivery  system  has  been 
identified  as  well  as  the  speed  at  which  important  medical  information  is  shared.  The  policy  is 
addressing these issues via the promotion of interoperable systems and standards for information 
storage and dissemination.  

The primary targets for adoption of EMRs have to incur significant expense to acquire software and 
input  patient  information  into  the  EMR  systems.  These  systems  generally  do  not  connect  with 
scheduling,  insurance,  and  billing  systems  that  most  medical  practices  currently  operate.  Privacy 
concerns  also  have  been  raised,  especially  in  response  to  insurance  company  partnerships  with 
software  providers.  Such  partnerships  raise  worries  that  insurance  companies  will  have  access  to 
patient information that will enable them to charge higher rates or deny claims.  

 

How were the activities expected to lead to desired changes in behaviour? 

The policy put in  place  a holistic approach and proposed measures that sought to address all the 
key  stakeholders:  Patients,  Care  providers,  Researchers  and  Policy  makers.  Specific  programmes 
for each stakeholder enable to address specifically their own issues and needs.  This ensured that 
changes in behaviour occurred throughout the health system and no one group was left behind. 

36 

 
 
 
Policy lessons 

The HITECH act is often quoted as an example of demand-side innovation approach to advance the 
adoption of electronic medical records24.  

The following points can be considered as good practices: 

 

 

 

 

 

Addressing the ecosystem as a whole and not separately. This enables the policy makers to 
address specific issues and needs as well as organising a dialogue amongst all stakeholders. 

Encourages connections with novel research through the SHARP program. 

Catalyst for adoption of EMR technology in addition with “meaningful use” that induces 
change and improves practices from care providers. 

Certification: HITECH foster the market emergence of certified vendors and an impact on 
“industrial and service providers”.  

Monitoring and assessment: the programmes are intensively evaluated providing continuous 
data about the implementation of the programme. But evaluations also aim at identifying 
good practices and continuously learning from the implementation of the programs. Finally, 
benefits of Health Information Technology are also evaluated from theoretical perspectives. 

References: 

 

 

 

 

 

Mini Country Report/United States of America under Specific Contract for the Integration of 
INNO policy TrendChart with ERAWATCH (2011 - 2012) 
http://ec.europa.eu/enterprise/policies/innovation/files/countryreports/usa_en.pdf  

ERAWATCH,  Health  Information  Technology  for  Economic  and  Clinical  Health  (HITECH) 
http://erawatch.jrc.ec.europa.eu/erawatch/opencms/information/country_pages/us/support
measure/support_mig_0006  

Blumenthal, David; Tavenner, Marilyn (2010): The “Meaningful Use” Regulation for Electronic 
Health Records, The new England Journal of Medicine, 363:501-504 

http://www.nejm.org/doi/full/10.1056/NEJMp1006114  

OECD (2011). Demand-side Innovation Policies. OECD Publishing. 
http://dx.doi.org/10.1787/9789264098886-en 

Policy documents, evaluation reports and studies:  

 

 http://dashboard.healthit.gov/evaluations/ monitoring and evaluations are ongoing. 

24   OECD (2011). Demand-side Innovation Policies. OECD Publishing. 

http://dx.doi.org/10.1787/9789264098886-en 

37 

 
 
 
 
 
 
                                                 
C.5.  Defence-related R&D procurement schemes 

Policy 
Name  and 
URL 

Promoting 
Institution 

 Defence-related R&D procurement schemes in USA 
www.defense.gov; www.darpa.mil 

US Department of Defence/DARPA 

Country 
(Region) 

United States 

Level of 
involvement 

Federal.   
Sectors: security and defence sectors 

Key characteristics  

The Department of Defence (DOD) is by far the largest US procuring agency spending most of its 
funding on security and defence-related research, development and engineering.  The DOD spends 
more  than  US$200  billion  annually.  The  money  is  spent  on  procurement,  research  and 
development  and  maintenance  by  numerous  contracting  offices  in  the  United  States  and 
throughout the world.  

It is often referenced that in 2004, US federal government agencies spent $49Bn on US wide R&D 
procurements  (15%  of  the  total  federal  procurement  budget).  90,6%  of  the  US  federal  R&D 
procurements  were  defence/space  related  (DOD,  NASA,  DHS),  9,4%  civilian  (4,26%  on  Health; 
2,48%  on  Energy;  0,37%  on  Education;  0,25%  on  Transport,  0,14%  on  Environment).  The 
majority of all R&D procurement is spent on the defence budget. It is important to highlight here 
that most Department of Defence project spending and details are kept confidential. Details about 
recent and ongoing contracts are  never disclosed due  to either Intellectual Property Rights issues 
or research confidentiality priorities mandated by government.  

Each year the U.S. Congress passes a Defence Authorization Act, which authorizes specific defence 
programs,  and  a  Defence  Appropriations  Act  which  approves  funding  for  such  projects.  Congress 
passes separate Acts for military construction. Congressional debate is often contentious. There is 
a  great  deal  of  procurement  money  involved,  and  decisions  on  funding  weapons  systems  may 
significantly impact the economy of the states and districts represented by individual members of 
Congress.  The  DoD  has  a  long  history  of  procurement  mechanisms25,  acquisition  standards  and 
regulations,  and  contract  negotiation  and  awarding  practices.  The  DoD  awards  procurement 
through  its  main  defence  departments:  the  Air  Force,  Army,  Navy,  and  the  DARPA  (Defence 
Advanced Research Projects Agency).  

DARPA  is  the  central  R&D  organization  for  the  Department  of  Defence  and  is  charged  with 
“sponsoring  revolutionary,  high-payoff  research  that  bridges  the  gap  between  fundamental 
discoveries  and  their  military  use”.  It  was  established  in  1958  to  prevent  strategic  surprise  from 
negatively  impacting  U.S.  national  security  and  create  strategic  surprise  for  U.S.  adversaries  by 
maintaining  the  technological  superiority  of  the  U.S.  military.  DARPA  carries  out  high-risk,  high-
payoff research, development and demonstration of new technologies and systems that serve the 
war-fighter and the Nation’s defence. The Agency has a rich history of successes ranging from the 
Internet to GPS, stealth, and UAVs. To fulfil its mission, the Agency relies on diverse performers to 
apply multi-disciplinary approaches to both advance knowledge through basic research and create 
innovative  technologies  that  address  current  practical  problems  through  applied  research.  As  the 
DoD’s  primary  innovation  engine,  DARPA  undertakes  projects  that  are  finite  in  duration  but  that 
create lasting revolutionary change. 

25  

Defence  procurement  is  governed  by  the  Federal  Acquisition  Regulations  (FAR)  a  body  of  complex 
regulations  that  have  had  the  effect  of  separating  defence  contractors  from  the  mainstream  economy. 
The DOD has sought to broaden its technology and industrial base by allowing development and use of 
instruments  that  reduce  barriers  to  participation  in  defence  research  by  commercial  firms  that 
traditionally have not done business with the Government. These instruments were pioneered by DARPA 
and the DOD Grant and Agreement Regulations (DGARS) are designed to make it easier for commercial 
companies to enter into agreements with the DOD by using procedures that are not subject to most of 
the  FAR rules  and regulations.  These  procedures,  including  Grant  and Cooperative  Agreements,  “Other 
Transactions”  and  Technology  Investment  Agreements  offer  a  great  deal  more  flexibility  and  fewer 
regulatory requirements than standard government contracting. The use of these alternative procedures 
is designed to attract commercial firms that would not otherwise do business with the DOD. 

38 

 
 
                                                 
 
 
 
DARPA  announces  funding  opportunities  using  various  solicitations  and  announcements26.  It 
primarily uses two solicitation methods for FAR-based (Federal Acquisition Regulation) procurement 
contracts:  (1)  Broad  Agency  Announcements  (BAAs)/Research  Announcements  (RAs)  and  (2) 
Requests  for  Proposal  (RFPs).  Although  less  frequently  used  than  BAAs,  RFPs  are  a  formal 
competitive means of soliciting proposals in response to government requirements for supplies and 
services in excess of the simplified acquisition threshold or where there is a common statement of 
work. 

Side - Type - Interactions (very brief summary – to be developed in the next section) 

Public demand, strategic procurement (national defence)  and R&D funding & subsidies.  

Interactions with demand/supply side  

Defense-related  R&D  procurement  and  defense-related  R&D  spending/funding    carried  out  by 
DOD/DARPA  are  closely  linked  together  as  defense-related  R&D  investments  frequently  lead  to 
substantial government purchases of new technologies. The military services, whose requirements 
often emphasize performance above all other characteristics (including cost), have on a number of 
occasions  functioned  as  a  “lead  purchaser”,  placing  large  orders  for  early  versions  of  new 
technologies. These procurement programs in many cases enable supplier firms to reduce the costs 
of their products through learning effects.  

The DOD/DARPA played a substantial role in the development of the electronic computer, computer 
software,  and  semiconductor  components  industries,  and  the  resulting  development  of  the 
Internet.  Federal  R&D  investment,  procurement  policies,  and  spillovers  of  technologies  from 
military to civilian applications contributed to the industrial and technological development of these 
sectors . 

Assessment of impacts  

The impact of defence-related R&D procurement is intertwined with that of defence R&D spending. 
The  benefits  and  costs  of  defence  R&D  spending  has  been  the  subject  of  long-running  academic 
and  policy  debates  and  the  results  remain  inconclusive27.  Supporters  of  defence  R&D  have 
traditionally  argued  that defence  R&D  has  produced  important  technology  spin-offs  to  the  civilian 
economy.  The  Internet,  the  GPS,  as  well  as  large-scale  integrated  circuits  and  graphic-design 
software  are  examples  of  the  result  of  defence  funding.  Despite  these  benefits  there  are  also 
grounds for some caution. Critics of the massive U.S. investments in defence R&D argued that, at 
the height of the Cold War, they diverted resources from more productive activities. Moreover, the 
“spin-off paradigm” has increasingly been called into question. Critics argue that it is misleading to 
think that the civil economy can benefit at little incremental expense from government investments 
in defence R&D. Spin-offs do not happen automatically, easily or without cost. Thus, Silicon Valley 
may have been born out of defence R&D spending but the growth and success of the commercial 
electronics industry has required enormous efforts beyond that original defence funding. 

Strong synergies exist between the DOD/DARPA and US universities. The DOD is a key sponsor of 
several  science  and  engineering  disciplines  and  is  the  third  largest  funder  of  university  research. 
Centres  of  excellence  in  universities  (such  as  the  MIT  Artificial  Intelligence  Lab)  have  benefited 
from  the  cumulative  effect  of  overlapping  funding  from  NSF,  DOD,  DOE,  NASA  and  companies. 
Spin-offs  by  university  researchers  to  create  small  firms  have  become  an  important  means  of 
commercialising defence research. In addition, DOD also plays a very important part in the training 
of graduate scientists and engineers, by supporting a high percentage of federally funded graduate 
students  in  some  fields  (i.e.  computer  sciences,  aerospace  engineering,  electrical  engineering, 
metallurgy/materials engineering). 

DOD  R&D  funding  and  defence  procurement  have  created  a  market  and  reduced  business  risks 
through early acquisition of new technology by technically sophisticated users. DOD’s willingness in 
the 1960s to pay almost any price for compact, lightweight electronics for its missile programmes 
stimulated  the  infant  semiconductor  industry.  This  early  and  cost-insensitive  purchasing  helped 
companies  pioneering  the  technology  to  move  down  the  learning  curve,  reducing  their  costs  to  a 
point  where  commercial  customers  could  afford  the  new  chips.  In  the  same  way,  defence 
procurement made an important contribution to the development of commercial computers. Today, 

26  

27  

The DARPA website, available at [http://www.darpa.mil], includes links to solicitations and a publication, 
Doing Business with DARPA, that provides information on the agency’s procurement process. 

Source  for  this  section:  U.S.  Defence  R&D  Spending:  An  Analysis  of  the  Impacts  (2004),  Rapporteur’s 
report for the EURAB Working Group ERA Scope and Vision by Andrew D. James (PREST) 

39 

 
 
                                                 
defence  procurement  is  playing  a  role  in  advancing  knowledge  systems,  power  technologies  and 
the DOD has been one of the earliest organisations to find applications for nanotechnology.  

A  further  way  in  which  defence  R&D  may  be  seen  to  be  supporting  broader  U.S.  economic 
competitiveness  is  through  its  use  as  a  source  of  early-stage  seed  funding  for  technology 
companies. Defence R&D is increasingly being used to make seed investments in new technologies 
with  potential  defence  applications.  DARPA  pioneered  the  use  of  defence  R&D  to  support 
technology entrepreneurs and in recent years it has sought out large ICT companies like Hewlett-
Packard, Lucent and IBM  to  participate  in research projects related to microelectronics, photonics 
and wireless communications.  

Metrics/Indicators 

A recent study28, looking at the  impact of military  procurement spending on corporate innovation 
among  publicly  traded  firms  for  the  period  1966-2003,  examined  the  relationship  (elasticity) 
between  defence  spending  and  company-sponsored  R&D  and  patenting,  finding  that  a  10% 
increase in military procurement led to a 0.7% increase in both corporate R&D and patenting in the 
broader economy. This is twice the rate at which an equivalent increase in civilian sales raises the 
same  innovation  indicators.  Thus  it  appears  that  military  spending  effectively  spurs  overall 
innovation.  According  to  this  study,  military  spending  has  positive  spill-overs  for  the  rest  of  the 
economy:  by  providing  a  source  of  demand  for  new  technologies  that  do  not  have  existing 
markets, military spending provides an important impetus for R&D that impacts broader innovation 
and by extension economic welfare.  

Policy lessons 

It has been widely recognised that in the US the DOD (and in particular DARPA as the central R&D 
organization for the Department of Defence) have played a substantial role in the development of 
the  electronic  computer,  computer  software,  semiconductor  components  industries,  and  the 
resulting  development  of  the  Internet.  Federal  R&D  investment,  procurement  policies,  and  spill-
overs  of  technologies  from  military  to  civilian  applications  contributed  to  the  industrial  and 
technological  development  of  these  sectors.  DARPA’s  key  characteristics/success  factors  can  be 
summarised in the following points:  

 

 

 

 

 

 

 

 

Small and flexible: DARPA has only about 140 technical professionals; DARPA presents itself 
as “100 geniuses connected by a travel agent.”  

Flat organization: DARPA avoids hierarchy, essentially operating at only two management 
levels to ensure the free and rapid flow of information and ideas, and rapid decision-making.  

Autonomy and freedom from bureaucratic impediments: DARPA has an exemption from Title 
V civilian personnel specifications, which provides for a direct authority to hire talents with 
the expediency not allowed by the standard civil service process.  

Eclectic, world-class technical staff and performers: DARPA neither owns nor operates any 
laboratories or facilities, and the majority of the research it sponsors is done in industry and 
universities. Very little of DARPA’s research is performed at government labs.  

Teams and networks: DARPA creates and sustains teams of researchers from different 
disciplines that collaborate and share in the teams’ advances.  

Hiring continuity and change: DARPA’s technical staff is hired or assigned for four to six 
years. It retains a base of experienced experts – its Office Directors and support staff – who 
are knowledgeable about DoD. The staff is rotated to ensure fresh thinking and perspectives, 
and to have room to bring technical staff from new areas into DARPA. It also allows the 
program managers to be bold and not fear failure.  

Outsourced support personnel: DARPA extensively leverages technical, contracting, and 
administrative services from other DoD agencies and branches of the military. This provides 
DARPA the flexibility to get into and out of an area without the burden of sustaining staff, 
while building cooperative alliances with its “agents.” These outside agents help create a 
constituency in their respective organizations for adopting the technology. 

With DARPA’s small organizational structure and ability to outsource support personnel, while 
also not being confined within the US personnel security requirements, (with the ability to be 

28  

Reagan’s  Innovation  Dividend?  Technological  Impacts  of  the  1980s  US  Defense  Build-Up.,  by  Mirko 
Draca,  (2012).  Department  of  Economics,  University  College  London  and  Centre  for  Economic 
Performance, London School of Economics. 

40 

 
 
                                                 
able to hire whenever needed in an immediate way) DARPA minimizes procurement program 
costs. 

References 

 

 

 

 

U.S. Defence R&D Spending: An Analysis of the Impacts (2004), Rapporteur’s report for the 
EURAB Working Group ERA Scope and Vision by Andrew D. James (PREST) 

Reagan’s Innovation Dividend? Technological Impacts of the 1980s US Defense Build-Up, by 
Mirko  Draca,  February  2012.  Department  of  Economics,  University  College  London  and 
Centre for Economic Performance, London School of Economics. 

Defense  Contract  Trends  -  U.S.  Department  of  Defense  Contract  Spending  and  the 
Supporting Industrial Base (2011) 

Defense-Related  R&D  and  the  Growth  of  the  Postwar  Information  Technology  Industrial 
Complex  in  the  United  States  (2005)  by  R.  Fabrizio  Kira,  C.  Mowery  David,  in  Revue 
d'économie industrielle. Vol. 112. 4e trimestre 2005. pp. 27-44 

 

Doing Business with DARPA,  http://www.darpa.mil 

41 

 
 
 
 
 
C.6.  Procurement-conditioned SME R&D programme 

Policy Name 
and URL 

 Procurement-conditioned SME R&D programme 

Promoting 
Institution 

The  Korea  Small  and  Medium  Business 
Administration (SMBA) 

Country 
(Region) 

Korea 

Level 
of 
involvement 

National, but focused on technology clusters (Seoul and R&D Zones).  The aim is to 
increase import substitution 

Key characteristics  

SMEs  selected  for  this  project  can  receive  up  to  €525,000  in  zero-interest  R&D  funds  without 
collateral. If successful in the development of products, large enterprises and public organisations 
that  requested  the  development  will  purchase  the  products  directly,  providing  SMEs  with  direct 
sales channels. 

This  is  a  combination of  supply  and  demand-side policies  with  financial  support  for  capabilities  to 
meet purchaser’s requirements.  See also New Technology Purchasing Assurance Programme  

The Programme comprises the following components: 

 

 

 

 

Government agencies, public institutions and private business commission SMEs to develop a 
new technology with the assurance that they will purchase the technological products 

The SMBA finances the technological development of SMEs, while public institutions purchase 
the products (for a fixed period of time – three years is preferred). If the product is 
commissioned by a public organisation the programme will provide up to 75% of 
development costs. If private organisations are commissioning, they provide 20% and the 
government up to 55%.  Development periods are limited to two years.  Since 2008 the 
planned procurement must be at least five times the government contribution and the ceiling 
per project is around €350,000.  If and when the technology is successfully developed the 
government can reclaim 20% of the costs 

A Technology Research Council, comprising public and private procurers, has been 
established to select project expected to generate the largest economic impact.  A key 
criterion is whether project outputs will substitute for imports 

A Large Conglomerate-SME Technology Co-operation Centre has been established.  It will 
provide technical support to SMEs, again with an emphasis on products which will substitute 
for imports.  The Centre provides more than technical support and will also assemble data 
bases on (import-replacing)technologies in order to advise SMEs and on the selection of 
projects 

Side - Type - Interactions  

The programme is principally concerned with procurement to stimulate technology development by 
SMEs with a major aim of import substitution.   However, financial support  is provided  to SMEs in 
various  ways  (see  below)  and  there  are  a  range  of  supporting  measures  such  as  product 
certification/assurance  and  the  Technology  Co-operation  Centre  which  provides  information  and 
support to SMEs. 

Interactions with demand/supply side  

The  programme  explicitly  combines  supply  side  polices  with  demand-side  procurement.  Financial 
support is provided through SMEs receiving up to 75% of the cost of developing the product  

Other supply side measures include: 

 

 

Well-developed processes for bringing SMEs and purchasers together.  Notably, this includes 
large private enterprises as well as the public sector, which may reflect the distinctive 
economic history and structure of Korea 

Background analysis and the establishment of a Conditional Procurement Technology 
Research Council to identify priority areas for procurement.  The Programme identifies “New 

42 

 
 
 
 
 
Excellent Products” and participating organisations are mandated to spend a higher 
proportion of their budget on these.   

 

 

Provision of business support to the SMEs 

Technology and information support through the Technology Co-operation Centre 

Assessment of impacts  

An evaluation of the programme concluded: 

 

 

 

 

SMEs that received government support saw an improvement in their technology levels and 
independence and a narrowing of the technology gap between advanced and domestic 
technologies 

of the 510 projects funded by the government from 2002 to 2008, 266 projects were 
completed and 214 were under way 

of the successful projects,207 were procured at €14.3 bn (procurement success rate 77.8%), 
generating an average of €700,000 in revenues per project (average funding of €105,000) 

 Given the replacement of imported goods and cost reduction, the total financial effect is 
estimated at €246m implying an economic effect 11.4 times the government funding.  

Metrics/indicators  

The aims of the programme are clearly stated (SME development and import substitution), but we 
have  not  identified  documentation  which  gives  the  underlying  rationale  for  government 
intervention.  However, the implicit rationale seems to include: 

 

 

 

Perceived high risk on the part of purchasers in buying new technology from SMEs 

Access to finance by SMEs for technology development purposes 

Systemic failures leading to over reliance on imports 

The evaluation data cited above provides some high level indicators of the programme’s success in 
addressing  these  issues.    It  was  based  on  survey  data  and  econometric  analysis  which  also 
considered: 

 

 

 

Awareness, recognition and utilisation of the programme amongst businesses 

Additionality amongst participating firms 

Perceptions of administrative barriers. 

Note that a review of innovation polices by STEPI concluded that: tax incentives have greater effect 
on  the  firm's  innovation  activities,  relative  to  other  instruments  such  as  government  financial 
measures, procurement, legal and institutional infrastructure, and other indirect incentives. 

Policy lessons 

Policy lessons are similar to the New Technology Purchasing Assurance Programme: 

 

 

 

 

It has successfully combined demand (procurement) polices with supply-side (R&D 
subsidies).  The latter are thought to have been important in attracting SMEs and enhancing 
their capacity to meet purchaser’s requirements 

The programme is embodied within a well-developed system which includes systems for 
identifying priority areas and non-financial support for participating SMEs 

The system has been reviewed and appears to be continually evolving 

The involvement of large private sector organisations as purchasers is interesting, although 
we have little information on their influence over impacts.  They obviously increase the 
procurement potential of the programme and we would speculate that longer term customer 
supplier relationships could emerge as a result 

References: 

  Case study in: OECD Report 2011, Demand-side Innovation policies (references to sources not 

provided) 

  Briefly mentioned in: Youngjoo Ko and HoChull Choe (Dec 2011) Mini Country Report Thematic 
Report  2011  under  Specific  Contract  for  the  Integration  of  INNO  Policy  TrendChart  with 
ERAWATCH 
2011, 
http://ec.europa.eu/enterprise/policies/innovation/files/countryreports/korea_en.pdf   

(2011-2012), 

July 

43 

 
 
 
C.7.  New Technology Purchasing Assurance Programme 

Policy Name 
and URL 

 New Technology Purchasing Assurance Programme 

Promoting 
Institution 

The  Korea  Small  and  Medium  Business 
Administration (SMBA) 

Country 
(Region) 

Korea 

Level of 
involvement 

This is a national programme although funds have naturally been focused on areas 
where  technology-based  SMEs  are  located  and  these  tend  to  be  clustered  in 
various parts of the country.  A wide range of sectors and technologies are eligible.  
However, there needs to be a customer for the output (see below). 

Key characteristics  

This  is  a  procurement  policy  designed  to  stimulate  technology  development  by  SMEs  through 
encouraging  the  purchase  of  product  by  the  public  and  private  sector.    It  has  a  number  of 
distinctive  components  which  are  referred  to  below.    The  scheme  was  first  launched  in  1996.  
Public  sector  organisations  were  required  to  purchase  technological  products  from  SMEs  whose 
performance  has been approved by the government.   However, there was no means of enforcing 
this requirement and uptake of the scheme was low. The scheme was radically revised in 2005 and 
by 2010 public organisations were legally required to devote 10% of their procurement budgets to 
products developed under the scheme. A subset of products is classified as New Excellent Products 
and at least 20% of these products should be purchased through the scheme.   

The  Programme  has  continued  to  evolve  since  2005  and  at  present  it  comprises  the  following 
components: 

 

 

Government agencies, public institutions including the Defence Ministry, KEPCO (Korea 
Electric Power Corp.) KOGAS (Korea Gas Corporation), and Korea Railroad Corporation and 
private business commission SMEs to develop a new technology with the assurance that they 
will purchase the technological products 

Buyers are granted immunity for losses incurred due to the procurement of products covered 
by performance insurance 

Side - Type - Interactions  

The programme is principally concerned with procurement to stimulate technology development by 
SMEs with a major aim of import substitution.   

Interactions with demand/supply side  

The programme is very much demand-side targeted.  However a parallel programme provides R&D 
funds  and  other  support  for  SMEs  which  have  been  commissioned  to  develop  and  supply  new 
products. (see Procurement-conditioned SME R&D programme) 

However,  it  has  a  well-developed  structure  for  bringing  SMEs  and  purchasers  together.    Notably, 
this includes large private enterprises as well as the public sector, which may reflect the distinctive 
economic history and structure of Korea 

Assessment of impacts  

The  2005  changes  to  the  programme  appear  to  have  been  very  successful  in  attracting  SMEs.  
During  the  early  stage  of  the  programme,  the  proportion  of  public  procurement  of  new  SME 
technology products was less than 3% of total public procurement of SME product. However, after 
the  revision  and  the  implementation  of  the  Performance  Certification  system  in  2005,  the 
proportion  has  risen  sharply  to  9.3%  of  total  public  procurement.  In  2010,  the  proportion  is 
expected  to  reach  more than  10%,  the  target  set  in  the  2005-06  revision.  Public  procurement of 
SME technology products amounts to €1.5bn.  The amount has more than tripled since the revision 
to the programme.  

44 

 
 
 
 
 
An evaluation of the programme surveyed participants and the results are provided in table 1.  

Benefit 

% reporting 

Burden on investing in innovation reduced 

Innovation outcomes increased 

Innovation accelerated 

Larger innovation project 

Follow on innovation project 

Securing stable sales 

Increased long-term competence 

22 

23 

23 

20 

29 

37 

48 

Table 1: % of participating SMEs reporting benefits as a result of participation 

Metrics/indicators  

The  aims  of  the  programme  are  clearly  stated  (SME  development),  but  we  have  not  identified 
documentation  which  gives  the  underlying  rationale  for  government  intervention.    However,  the 
implicit  rationale  seems  to  include  perceived  high  risk  on  the  part  of  purchasers  in  buying  new 
technology from SMEs. 

The evaluation data cited above provides some high level indicators of the programme’s success in 
addressing  these  issues.    It  was  based  on  survey  data  and  econometric  analysis  which  also 
considered: 

 

 

 

Awareness, recognition and utilisation of the programme amongst businesses 

Additionality amongst participating firms 

Perceptions of administrative barriers. 

Note that a review of innovation polices by STEPI concluded that: tax incentives have greater effect 
on  the  firm's  innovation  activities,  relative  to  other  instruments  such  as  government  financial 
measures, procurement, legal and institutional infrastructure, and other indirect incentives. 

Policy lessons 

The  data  cited  above,  while  far  from  conclusive,  suggests  a  successful  programme,  at  least  after 
the changes introduced in 2005.  The main policy lessons are: 

 

 

 

 

 

It was insufficient to simply encourage procuring organisations to source supplies from SMEs.  
Legal enforcement was required and the targets for procurement are relatively high 
(especially in the case of new excellent products) 

Part of the initial reluctance of procurement organisations to engage with SMEs reflected risk 
aversion and uncertainty as to SME’s performance (including perceived unreliability.  These 
have been addressed by providing Performance Insurance to insulate purchasers from any 
losses they might incur, and Performance Certification of products to reduce uncertainty 

The programme is embodied within a well-developed system which includes systems for 
identifying priority areas and non-financial support for participating SMEs 

The system has been reviewed and quite radical changes made as and when required.  It 
appears to be continually evolving 

The involvement of large private sector organisations as purchasers is interesting, although 
we have little information on their influence over impacts. They obviously increase the 
procurement potential of the programme and we would speculate that longer term customer 
supplier relationships could emerge as a result 

45 

 
 
 
 
References: 

 

 

 

Case  study  in:  OECD  Report  2011,  Demand-side  Innovation  policies  (references  to  sources 
not provided) 

Youngjoo Ko and HoChull Choe (Dec 2011) Mini Country Report Thematic Report 2011 under 
Specific  Contract  for  the  Integration  of  INNO  Policy  TrendChart  with  ERAWATCH  (2011-
2011, 
July 
2012), 
http://ec.europa.eu/enterprise/policies/innovation/files/countryreports/korea_en.pdf  

Woosung  Lee  (2009)  Strategic  Procurement  Policies  for  Innovation:  Korean  Case,  Firm 
Survey and Empirical Results: http://www.oecd.org/sti/inno/43730075.pdf  

C.8.  Pre-commercial Procurement by NHS, UK 

Policy Name 
and URL 

Promoting 
Institution 

Level 
of 
involvement 

Pre-Commercial Procurement by NHS 

National Health Service (NHS)  

Country 
(Region) 

United Kingdom  

The National Health Service (NHS) Pre-Commercial Procurement strategy is carried 
out by NHS’ National Innovation Centre (NIC) at the national level. PCP consists of 
an integrated approach to innovation procurement developed for mid-to-long term 
innovation procurement needs.  

Key characteristics  

Aims and objectives:  
 

Targeting innovation towards social challenges and policy end economic needs; 

 

Creating incentives for innovation by overcoming system failures; 

The  PCP  strategy  was  adopted  by  NHS  in  2009,  following  the  introduction  of  the  Innovation 
Procurement Plan (UK Government 2009) with the aim to re-establish the centrality of innovation 
and procurement of innovation within the NHS strategy.  

The NHC NIC employs a bespoke model to introduce innovation via PCP described in the following 
figure.  The model represents the stages occurring between the definition of needs experienced by 
clinical teams (far left), to the diffusion of the adopted solution (far right). Crucial to the project is 
the  first  step  which  involve  clinical  teams  in  the  identification  of  the  desired  product  service 
(represented  by  the  acronym:  WIBGI  –  ‘would  not  be  great  if’).  Once  established  the  priorities 
trough brainstorming exercises with clinical teams, the second stage involves the understanding of 
the  market  positioning  of  clinical  needs.    The  NIC  will  perform  horizon  scanning  exercises  to 
address if the technology is already available or not before deciding the procurement instrument to 
adopt. PCP will be employed just if technology identified as clinical need is not available, but there 
is  evidence  that  activities  can  be  undertaken  to  further  experiment  to  address  the  need.  In  this 
case, NHS will engage in PCP and procure the R&D necessary to create the innovative clinical need 
desired.  

The maximum value of a PCP contract is up to 100.000£ covering the maximum period of two and 
a half years.  

46 

 
 
 
 
 
 
 
Figure 3: NIC Pre-commercial procurement Model 

Side - Type - Interactions  

Intended interaction (mainly from policy documents) 

The  interaction  between  NHS  and  firms  occurs  by  the  Competition  Tool  on  the  NIC  website.  This 
tools  challenge  completion  among  different  suppliers  to  propose  alternative  solutions  to  the 
identified  clinical  need.  The  process  occurs  in  three  phases  where  firms  competing  are  asked  to 
design;  prototype;  and  demonstrate  their  solutions.  After  evaluation,  the  successful  firm  will  be 
awarded a contract to deliver R&D services to develop a new innovation.  

Actual interaction (from policy evaluations) 

No evaluation has been carried out yet, but several case studies have highlighted improvements in 
terms  of  efficiency  and  transparency  of  the  process  as  well  as  the  positive  result  of  this  open 
collaboration framework between NHS-NIC and bidders.  

Interactions with demand/supply side  

 

Demand-side policies may be explicitly combined with other policies as part of a package 
designed to accelerate innovation.  

NHS’  Pre-Commercial  Procurement  is  explicitly  combined  with  two  other  demand-side 
policies, namely: Forward-Commitment Procurement and Small Business Research Initiative 
(SBRI). The explicit division of needs declined in short-term technological available solutions 
versus  long-term  solution  not  yet  available  allows  identifying  the  most  efficient  solution  to 
effectively  implement  and  quickly  respond  to  perceived  clinical  needs  avoiding  bottlenecks 
and maximising the division of innovative labour across different sets of procurers.  

A  direct  link  in  the  PCP  strategy  is  also  established  with  the  Small  Business  research 
Initiative  (SBRI)  whereas  the  competitions  are  based  on  SBRI  principles  to  ensure  the 
participation  of  small  and  medium  enterprises  access  to  wider  competitive  markets  for 
innovative ideas.  

 

Demand-side policies may themselves incorporate supply-side elements.  

To  fulfil  the  required  PCP  solution  there  is  a  certain  element  of  R&D  effort  needed  at  the 
procurer level and in this sense the NHS’ PCP model constitutes a demand-pull policy to drive 
R&D oriented solutions 

 

There might be unintended links between supply and demand side policies uncovered during 
the policy evaluation exercise. 

No formal evaluation yet but there are presentations on successful examples 

47 

 
 
 
 
 
 
 
 
Assessment of impacts  

The  immediate  impact  of  a  PCP  contract  will  be  seed  funding  for  the  development  of  innovative 
solutions  into  available  technology.  Specifically,  after  the  PCP  contract  is  established  the  bidders 
receive  R&D  funding  for  their  proof-of-concept  (20%)  and  development  (80%)  stages.  If  the 
immediate  effect  is  the  one  of  seed  funding  on  R&D,  in  the  medium  long  term  such  action  could 
potentially open new market segment for suppliers as well as introduce and diffuse on a large scale 
technologies  not  yet  available.  Finally,  PCP  can  also  be  seen  as  in  instrument  directly  affecting 
consumers’  needs  whereas  the  final  consumer  of  the  product  is  not  only  NHS  authorities  but  the 
patients, i.e.: the final customers for the NHS service.   

As highlighted above, the direct R&D funding to procurers can overcome issues of financial support, 
particularly  relevant  for  SMEs,  and  create  a  bridge  towards  the  development  of  lead-user 
innovation solutions.  

In the long term, the effect  of  PCP directly  involves an increasing in  social  welfare  linked to both 
producers’ and consumers’ surplus.  

Metrics/indicators. 

The  rationale  for  public  intervention  through  PCP  relies  on  overcoming  inefficiencies  previously 
generated by the imperfect system – both in terms of costs and timing. More specifically, the policy 
rationale is leaded by four key drivers:  

 

 

 

 

Deliver immediate efficiency and productivity gains 

Improve data, information and transparency in the system 

Re-think clinical engagement in the procurement of high-value medical devices and the 
subsequent relationship with the device industry, by improving outcomes at reduced cost 
through clinical procurement review partnerships 

Create a new national ‘enabling function’ to support leadership and build better capability 
throughout the system, primarily focusing on trusts capability and how they work with 
procurement partners. 

Policy lessons 

Among  the  case  studies  of  particular  relevance  in  terms  of  results,  NIC-NHS  present  a  series  of 
cases  such  as  for  example  Virtual  veins  (launched  in  2009),  a  virtual-reality  training  simulator 
revolutionising the way healthcare practitioners are trained in venepuncture, which avoids wrongly 
administered medication to patients, or Non- invasive glucose meter (launched in 2009), a mobile 
device  that  enables  to  measure  glucose  level  of  diabetic  patients  on  the  spot  without  finger-
sticking, just by touching the patient’s skin. The value of these projects for NHS relies on the life-
quality improvement for the patients as well as a forecasted cost saving to NHS of 236£ million per 
year.  

Among  the  case  studies  published  online,  one  also  see  the  involvement  of  an  international 
consortium of procurers from different EU countries which launched a join PCP call for tender with 
NIC-NHS: Supporting Independent LiVing for the Elderly through Robotics (SILVER).  

References: 

Policy documents, evaluation reports and studies 
 

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/226835/pro
curement_development_programme_for_NHS.pdf  
http://cordis.europa.eu/fp7/ict/pcp/uk-nhs-pcp-fcp-case.pdf  
http://cordis.europa.eu/fp7/ict/pcp/docs/nhs-pcps-nov2013.pdf  
http://www.nic.nhs.uk/  

 
 
 

 

http://cordis.europa.eu/fp7/ict/pcp/docs/silver-pcp-results-phase1.pdf  

48 

 
 
 
C.9.  Forward Commitment Procurement (FCP) 

Policy Name 
and URL 

Forward Commitment Procurement (FCP) 
https://www.gov.uk/government/publications/forward-commitment-
procurement-know-how-programme  

Promoting 
Institution 

Department  for  Business,  Innovation  & 
Skills (BIS) 

Country 
(Region) 

The United Kingdom 

Level 
of 
involvement 

FCP  is  promoted  by  the  BIS  at  the  national  level.  Active  agencies  contributing  to 
this activity include Her Majesty's Prison Service, the National Healthcare Services 
and other central government agencies. 

Key characteristics  

FCP model was firstly developed by the UK Government's Environmental Innovation Advisory Group 
(EIAG)  2003-2008  to  address  a  well-recognized  market  failure,  i.e.  the  lack  of  market  pull  for 
environmental innovations. 

Most FCP projects adopt a procedure similar to the notion of ‘competitive dialogue’, which involves 
trails  and/or  demonstrations  within  the  context  of  the  procurement  process  and  in  some  cases 
result in a forward commitment contract. 

Aims and objectives: 

 

 

 

To satisfy identified public needs that cannot be met by current solutions (products or 
services) so public services can be improved; 

By fulfilling the first objective, FCP also aims to contribute to enterprise development (at the 
micro level); 

And more ambitiously, to contribute to socioeconomic development at the macro level. 

Costs  vary  from  project  to  project;  there  is  not  fixed  budget  in  government  planning  but  funds 
come from government procurement budget. 

Side - Type - Interactions  

Demand-side policy instruments: public procurement 

Supply-side policy instruments: R&D support 

Intended interaction (mainly from policy documents): To fulfil the procurement requirement 
there is certainly R&D effort needed; policymakers intended to provide such a demand pull to drive 
solution oriented R&D. 

Actual  interaction  (from  policy  evaluations):  No  systematic  evaluation  done  yet.  Individual 
case  studies  suggested  that  intermediary/brokerage  individuals/organizations  played  important 
roles in facilitating the demand-supply interaction. 

Interactions with demand/supply side 

Supply-demand interactions associated with FCP involve several dimensions: 

 

Participants in demand side actions may also draw on separate supply-side support 
programmes which have been designed and implemented independently of the demand-side 
interventions. 

Firm participants in the FCP scheme is likely to have received various supply-side treatments 
including R&D funding at their earlier stages of core competence development. To satisfy the 
unmet public demand the suppliers involved in FCP scheme would have to perform additional 
R&D  for  prototype  and  actual  solution  development,  which  provides  a  further  basis  for 
interactions between demand-side and supply-side policy instruments. 

 

There might be unintended links between supply and demand side policies uncovered during 
the policy evaluation exercise. 

Although no formal evaluations have  been conducted yet, ‘good practice’  case studies have 
shown  that  the  implementation  of  FCP  involves  the  important  role  played  by  brokerage 

49 

 
 
 
 
 
 
support,  intermediary  agencies  and  networking  measures.  Also  public  training  schemes 
organized  by  BIS  and  other  agencies  as  a  type  of  supply-side  support  contributed  to  the 
implementation of FCP. 

Assessment of impacts 

Key, immediate outcomes generated by FCP, which can be distinguished from those generated by 
other policies, include primarily that the FCP contract would be the very first one obtained by the 
supplier  for  the  newly  developed  solutions;  this  is  of  critical  importance  given  the  important  role 
played by lead users for innovation. Immediate impacts would involve the opening of new business 
segments  for  suppliers,  improvement  of  firm  performance,  improvement  of  public  services 
delivered  by  the  public  users,  and  benefits  for  end  users  (if  different  from  procurers).  Long-term 
impacts could involve the opening of new markets and socioeconomic development and growth as 
a result. 

As  described  above,  for  firms  which  have  received  R&D  funding  and  other  types  of  supply-side 
support, FCP can provide a demand pull following earlier policy measures, so that the ‘policy gap’ is 
addressed  and  demand-side  policies  and  supply-side  policies 
in  a  sequential, 
complementary  manner.  During  the  FCP  process,  there  is  likely  to  be  supply-side  policies  e.g. 
brokerage  support  and  intermediation  measures,  and  supply-  and  demand-side  policies  are 
mutually reinforcing. 

interact 

Metrics/indicators. 

  What is the rationale for public intervention? 

The main rationale to justify the use of FCP is that there is a gap existing between the supply side 
and the demand side of new solutions. On the one hand, the potential users (in this case the public 
agencies)  have  unsatisfied  needs  for  more  advanced  or  creative  solutions  in  order  to  perform 
better  services  for  the  public,  but  they  are  not  aware  of  what  the  suppliers  can  deliver  and  their 
demand is poorly articulated; on the other hand, potentially competent suppliers face the challenge 
namely  a  lack  of  demand  pull  to  trigger  them  to  deliver  even  better  solutions  which  are  not  yet 
existing  for  the  market.  FCP  can  offer  an  opportunity  to  bridge  the  gap,  addressing  the  typical 
failure  of  information  asymmetry,  by  clearly  articulating  the  public  demand  and  offering  the 
suppliers with a future contract as long as they deliver the required solutions. 

  How were the activities expected to lead to desired changes in behaviour? 

Similarly  to  the  case  of  SBRI  (which  is  SME  oriented),  through  FCP  policymakers  hope  that  the 
main target groups, public users on the one hand and innovative suppliers on the other, can take 
up behavioural change towards a more open attitude to innovation and public-private collaboration. 
Especially  for  public  users  the  BIS  hopes  to  create  such  a  culture  that  the  users  can  identify 
unsatisfied public demands whereby innovative solutions can be explored, and innovative solutions 
further lead to socioeconomic development and improvement of public services. 

  What metrics does the logic model suggest would be useful in an evaluation? 

  Contract value owing to FCP and its weighting in the firm’s business portfolio; 

  Corresponding sales revenue and profitability etc. associated with firm performance; 

 

Intellectual property (patents etc.) generated because of the FCP case. 

No ‘Best practices’ have been illustrated through case studies. 

Policy lessons 

A  series  of  ‘best  practice’  case  studies  have  been  published  online  by  BIS29,  a  well-known  one 
being the Her Majesty's Prison Service (HMPS) ‘zero waste mattress system’. Demonstrated by the 
case  studies,  critical  success  factors  included:  1)  the  identification  and  articulation  of  unmet 
demand;  2)  a  commitment  to  meet  the  unmet  demand;  3)  Tenacious  and  committed  project 
management;  4)  provide  a  role  of  intermediation  and  brokerage;  5)  adapt  the  way  that 
procurement is (normally) planned and implemented (i.e. innovative approaches to procurement). 

29  

See http://www.bis.gov.uk/assets/biscore/innovation/docs/f/11-1054-forward-commitment-procurement-buying-
innovative-solutions.pdf  and 
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/32438/11-996-case-study-fcp-in-
practice.pdf 

50 

 
 
 
                                                 
References: 

Policy documents, evaluation reports and studies 

 

 

 

 

https://www.gov.uk/government/publications/forward-commitment-procurement-know-how-
programme 

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/32438/11-
996-case-study-fcp-in-practice.pdf 

http://ec.europa.eu/enterprise/policies/innovation/policy/lead-market-
initiative/files/conference/230316_en.pdf 

http://www.bis.gov.uk/assets/biscore/innovation/docs/f/11-1054-forward-commitment-
procurement-buying-innovative-solutions.pdf 

C.10. Innovation Procurement Scheme by the Ministry of Defence 

Policy Name 
and URL 

UK Ministry of Defense (MoD) Procurement Plan (2009)  
http://www.science.mod.uk/strategy/documents/procurementplan.pdf 

Promoting 
Institution 

Ministry of Defence – UK  

Country 
(Region) 

United Kingdom  

of 
Level 
involvement 

National 

Key characteristics  

The  Ministry  of  Defence  leads  public  expenditures  in  public  procurement  (second  in  UK  to  the 
Department of Health).  

Its  Procurement  Plan  was  implemented  in  2009  as  a  response  to  the  Government’s  innovation 
nation white paper which called for a committed coordination across all of its departments.  

The  aim  of  the  plan  is  to  drive  innovation  by  generating  and  exploiting  new  technologies  and 
services, including innovating in the acquisition cycle by reducing procurement times, reliability of 
equipment and cost efficiency.  

The  MoD  procurement  plan  consists  in  a  suite  of  white  papers  addressing  various  elements.  The 
integrated aspects of the plan concern:  

 

 

 

 

 

Defence industrial strategy 

Defence technology strategy 

MoD Innovation strategy 

Defence technology plan  

MoD technology partnership in defence 

Side - Type - Interactions 

 
 

Intended interaction (mainly from policy documents): Public procurement  
Actual  interaction  (from  policy  evaluations):    No  evaluation  are  available,  however, 
given  the  nature  structure  of  MoD  procurement  plan,  it  is  clear  a  form  of  R&D  funding  to 
selected suppliers of towards the development of new technology and services.  

Interactions with demand/supply side  

  Demand-side  policies  may  be  explicitly  combined  with  other  policies  as  part  of  a 

package designed to accelerate innovation.  

The  MoD  procurement  plan  is  part  of  the  UK  Government  Strategy  ‘Innovation  Nation’  (2008) 
which committed all the UK government departments to produce an innovation procurement plan. 
Moreover,  the  MoD  has  been  among  the  main  clients  of  the  Small  Business  research  Initiative 
(SBRI) designed to increase the access of SMEs to public sector procurement,  

51 

 
 
 
 
 
  Demand-side policies may themselves incorporate supply-side elements.  
Part  of  the  MoD  procurement  plan  directly  addresses  technology  partnerships  making 
recommendations on effective R&D joint planning with supply side providers of technology.  

Assessment of impacts  

Account of framework conditions prior to the introduction of the policies:  

The MoD Procurement Plan is the latest of a series of actions (Smart Procurement Initiative I and 
II:  1998  and  2001  respectively)  undertaken  by  the  MoD  to  streamline  the  procurement  process. 
The  policy  developed  from  clear  attempts  throughout  the  years  to  address  initial  criticisms  (from 
the  UK  National  Audit  Office)  of  inefficiencies  associated  to  defence  procurement  process  and 
spending.   

Metrics/indicators. 

  What is the rationale for public intervention? 

Rationale for public intervention is to create a network of suppliers and partners with which the 
MoD  could  implement  its  composite  technology  strategy  through  innovation  in  public 
procurement and ultimately its overall defence strategy.  

Policy lessons 

N/A  

References: 

Policy documents, evaluation reports and studies 
 

http://www.science.mod.uk/strategy/documents/procurementplan.pdf  

 

 

 

 

 

http://www.science.mod.uk/Strategy/documents/technologypartnership.pdf 

http://www.science.mod.uk/modwww/content/dts_complete.pdf  

http://www.science.mod.uk/modwww/content/defenceindustrialstrategy.pdf  

Taylor  C.  (2003),  UK  Defence  Procurement  Policy,  Research  Paper  03/78,  INTERNATIONAL 
AFFAIRS AND DEFENCE SECTION, House of Commons Library 

Uyarra  et  Al.  (2014),  UK  Public  Procurement  of  Innovation:  The  UK  Case,  V.  Lember  et  al. 
(eds.), Public Procurement, Innovation and Policy, Springer-Verlag Berlin 

52 

 
 
 
C.11. Biometrics standardization UK 

Policy 
Name  and 
URL 

Biometric Standardisation  

Promoting 
Institution 

Department  of  Business,  Innovation  and 
and  British  Standards 
Skills 
Institution (BSI).  

(BIS) 

Country 
(Region) 

United Kingdom 

Level 
of 
involvement 

National 

Key characteristics  

The UK Biometric Standardisation programme started to shape in 2005 after the predecessor of the 
Department  of  Business  Innovation  and  Skills  identified  biometrics  as  an  emerging  technology 
where the traditional income-generating model applied to standards model was inadequate. 

Biometrics  identifies  systems  for  the  automatic  recognition  of  individual  based  on  behavioural  or 
biological  characteristics  (for  example: 
facial  geometry,  dynamic  signature 
recognition).  

fingerprints, 

As  such  the  development  of  standards  for  biometrics  recognition  saw  a  strong  interest  in  other 
governmental  departments  such  as  the  Home  Office  (specifically:  UK  Border  Agency  and  the 
Identity and Passport Service).  

The government support of Biometrics standardisation in UK is aimed to:  

 

 

 

Open  public  procurement  contracts  to  competitive  tenders  making  clear  reference  to 
expected standards  

Align UK Biometrics emerging sectors with international advances in technology 

Facilitate the exchange of information with other countries 

Costs of the operation are not disclosed.  

Side - Type - Interactions 

Demand-side: standards and regulations  

Intended interaction (mainly from policy documents) 

 
The  interactions  occurred  principally  between  the  regulation  side  and  the  need  to  identify  new 
standard  for  an  emerging  technological  field.  As  such,  a  demand-pull  action  was  certainly 
undertaken in order to identify innovative solution to emerging R&D models and technologies.  

Actual interaction (from policy evaluations) 

 
No policy evaluation is publicly available, although one by Ernst&Young was carried out on behalf of 
BIS. 

Interactions with demand/supply side  

An interesting aspect of this policy rests on the factors affecting government‘s decision to support 
standardisation of Biometrics technologies. The traditional framework for standard-making models 
depends  on  sales  of  the  produced  standards  and  related  products.  However,  the  expected  sales 
from  Biometrics  were  specifically  predicted  as  low  (with  only  a  small  number  of  companies 
operating in the area). The government however recognised the strategic importance of putting in 
place standardisation policies and procedures and decided (BIS; BSI and Home Office) to support 
the action regardless the traditional economic principles were not met by the sector.  

Moreover,  setting  regulations,  standards  and  common  rules  increases  the  chances  of  innovation 
diffusion  and  adoption  of  such  new  technology  in  the  market  place,  again  creating  an  overall 
positive impact on both consumers’ and producers’ surplus and on the general social welfare.  

53 

 
 
 
 
 
 
Assessment of impacts  

Distinguish  the  impacts  generated  by  the  demand-side  intervention  from  those 
generated by other policies:  

From  review  of  the  literature  it  has  emerged  that  interviews  were  conducted  with  key  staff  in 
Identity and Passport Departments. Those interviews showed an unconditional support towards the 
standardisation policy implemented which had impacted on:  

 

 

The capacity to enable and implement competition based on identity card contracts 

The acceleration of services such as the ones run by the Identity and Passport Service  

  Standardisation  has  enabled  a  fairer  and  more  open  market  and  prevented  situations  of 

domination of non-UK companies (monopolistic market) improving the level of competition 

Metrics/indicators. 

  What is the rationale for public intervention?  

The  rationale  from  public  intervention  steams  from  a  UK  Government  report  (Race  to  the  Top, 
2007),  which  saw  in  the  interaction  between  standards  and  innovation  a  crucial  element  in 
stimulating  industrial  development.  The  Report  particularly  recommended  greater  collaboration 
between  UK  standardisation  infrastructures  to  maximise  the  support  to  emerging  technologies, 
among which Biometric was identified as priority area.  

  How were the activities expected to lead to desired changes in behaviour? 

The activities have produced  changes in behaviour both  on the  side of technology adopters (such 
as the agencies involved in the implementation and operationalization of biometrics identification) 
as well as in final consumers of the service (citizens).  

Policy lessons 

Standardisation can play a significant role in developing and creating emerging technologies. Quite 
notably,  although  standardisation 
is  a  market-led  activity,  the  case  of  UK  Biometrics 
standardisation  proves  that  the  government  can  play  and  active  role  in  the  coordination  of  the 
standardisation process. As such, the standardisation policy put into place allowed the Government 
a more efficient and cost-effective procurement.  

References: 

 

 

 

Aphrodite  K.  (2011),  Demand-led  innovation  policies  in  the  United  Kingdom  –  Biometrics 
standardisation,  Department  for  Business  Innovation  and  Skills  (BIS),  in  OECD  (2011), 
Demand Side Innovation Policies, Paris: OECD.  

OECD (2011), Demand Side Innovation Policies, Paris: OECD.  

O’Sullivan  E.  and  Brevignon-Dodin  L.  (06/2012),  Role  of  Standardisation  in  Supporting 
Emerging Technologies, Report for  the  Department of Business, Innovation and Skills (BIS) 
and the British Standards Institution (BSI).  

54 

 
 
 
 
 
C.12. Danish Program for User-driven Innovation 

Policy Name 
and URL 

Promoting 
Institution 

Danish Program for User-driven Innovation 

Originally 
the  Danish  Enterprise  and 
Construction  Authority.    The  funds  were 
redirected  to  the  Business  Innovation 
Fund in 2010.  There have been no further 
calls for project proposals.  

Country 
(Region) 

Denmark 

Level 
of 
involvement 

National (although there were also some links to Nordic initiatives).  Projects in the 
business program (see below) were divided into three focus areas:  

  Strategic; Denmark’s strengths such as design, welfare, health, and food. 

  Regional,; every region in Denmark was awardee some funds 

 

“Other promising areas.” 

Seventy-two  per  cent  of  the  total  grant  was  equally  divide  between  strategic and 
other promising areas. 

Key characteristics  

The programme was formulated in 2005 and introduced in 2007. It focused on providing financial 
support  to  firms,  public  organisations  and  research  institutions  in  studying  users  or  collaborating 
more  with  users  to  identify  and  act  on  innovation  needs.    Denmark  is  believed  to  be  the  first 
country to launch such a programme. 

The  Danish  Ministry  of  Economic  and  Business  Affairs  defined  user-driven  innovation  as  “a 
systematic  approach  to  the  development  of  new  products,  services,  processes,  forms  of 
organization,  etc.  based  on  the  exploration  or  involvement  of  users’  lives,  identity,  practice,  or 
needs, including unrecognized needs that are expected to materialize later as demand from major 
user  segments.”  (Danish  Enterprise  and  Construction  Authority,  2007).  Users  are  broadly  defined 
as consumers, customers, employees, enterprises, collaborating partners, suppliers, or citizens. 

There is no single approach to user-driven innovation and Figure 1 illustrates the spectrum. 

Figure 4: User-driven innovation  

Source: Danish Ministry of Economic and Business Affairs 

The program for supporting user driven innovation was planned to stimulate collaboration between 
companies  and  educational  institutions  in  order  to  clarify  market  needs  and  create  related 

55 

 
 
 
 
 
competences.  The  network  among  technical  schools  and  business  colleges  was  also  planned  to 
develop as a centre of knowledge for companies in the regional areas. 

Two, more specific, programmes were developed: 

 

 

A  user  driven  innovation  research  programme  in  order  to  create  knowledge  so  that  public 
and  private  institutions  could  implement  user  driven  innovation  in  the  future.    Grants  were 
available  for  research  centres  (and  alliances)  and  projects.    Centre  grants  were 
approximately €650,000 per year.  The maximum grant for projects was €2.6m 

The user driven business programme for which private and public organisations were eligible. 
Grants to the public sector, research institutions, and educational institutions covered 75% of 
the eligible project’s cost, whereas grants to for-profit companies covered 50% of the eligible 
project’s cost. 

The research and business programmes ended in  2009 with the transfer of funds to the Business 
Innovation  Fund.    Only  private  companies  are  now  eligible.  There  is  no  specific  funding  for  user-
driven innovation  activities, but applicants for certain innovation  funds are  required to implement 
user driven innovation activities in their projects. 

Side - Type – Interactions; Interactions with demand/supply side 

The  programme  was  distinctive  in  that  it  provided  supply-side  support,  in  the  form  of  grants  for 
projects and supporting research, to identify innovation needs and therefore increased demand.  In 
this sense supply and demand-side policies were fully integrated, but we note that the aim was not 
to directly increasing demand; rather to help firms, and other organisations, identify demand. 

Assessment of impacts  

So far as we can tell from a literature review and discussions with Danish contacts there has been 
no evaluation of the impacts. Since the programme effectivelly ceased four years ago, it has also 
been  difficult  to  identify  and  contact  individuals  who  were  closely  involved.  A  midterm evaluation 
was  undertaken  in  2009  and  this,  unsurprisingly,  found  that  identifying  users’  needs  might  be  a 
necessary  (or  at  least  valuable)  input  into  successful  innovation  but  that  it  was  not  a  sufficient 
condition.  The concrete findings included: 

 

 

 

 

 

 

By 2009 74 projects had been funded 

72%  of  the  participating  companies  have  developed  or  expect  to  develop  new  services  or 
products. 

Private companies account for two-thirds of participants in the programme. 

Over 50% of participating companies have fewer than 50 employees. 

59% of the companies are from the knowledge services and IT sectors. 

75% of the projects involve a public-private innovation partnership. 

We  would, however, note that an, albeit unstructured,  literature  research did indicate a relatively 
large  number  of  papers  on  methodologies  from  Denmark.    The  programme  may,  therefore  have 
contributed to the knowledge base. 

Metrics/indicators  

As  noted  above,  very  few  indicators  exist.    A  fuller  evaluation  would  require  articulation  of  the 
rationale for public intervention (as opposed to the potential benefits of user driven innovation).  It 
seems likely that the logic model would identify limited information of benefits and approaches to 
user  driven  innovation  and  possibly  also  the  costs  of  collaborating  with  research  organisations.  
With  this  as  background  it  might  be  possible  to  specify  how  the  activities  undertaken  were 
expected  to  increase  the  adoption  of  user-driven  approaches  and  how  this  would  promote 
innovation.  None of this information is currently available. 

Policy lessons  

The lack of evaluation evidence precludes drawing policy lessons. 

56 

 
 
 
 
 
References: 

 

 

 

 

 

 

 

OECD (2011) Demand-side innovation policies 

The  Ministry  of  Economic  and  Business  Affairs’  Division  for  Research  and  Analysis  (2005) 
User-driven 
recommendations, 
Results 
http://www.euc2c.com/graphics/en/pdfs/mod3/userdriveninnovation.pdf  

innovation 

and 

Danish  Enterprise  and  Construction  Industry  (?)  INSIGHT  into  user-driven  innovation, 
http://www.hpm.org/file/17694/insight_into_user_driven_innovation.pdf 

Klitkou A. (2011) Mini Country Report Thematic Report 2011 under Specific Contract for the 
Integration 
(2011-2012) 
TrendChart 
http://ec.europa.eu/enterprise/policies/innovation/files/countryreports/denmark_en.pdf 

ERAWATCH 

Policy 

INNO 

with 

of 

User Driven Innovation in the Building Process 

Per  Christiansson1,**,  Kistian  Birch  Sørensen,  Mette  Rødtness,  Mette  Abrahamsen,Lars 
Alsdorf, 
Ostenfeld 
http://www.it.civil.aau.dk/it/reports/2008_11_tsinghua_journal.pdf 

Riemnann 

Morten 

, 

Drawing  users  into  Innovation  Policy:  a  study  of  the  Danish  policy  on  User-Driven 
Innovation, Susumu Ogawa, Kritinee Pongtanalert, Stephen Flowers 

57 

 
 
 
 
 
C.13. SBIR in the Netherlands 

Policy Name 
and URL 

 Small  Business  Innovation  Research  (SBIR)  programme  (Aanbesteden 
van innovaties) 

Promoting 
Institution 

Ministry  of  Economic  Affairs  (Ministerie 
van Economische Zaken) 

Country 
(Region) 

Netherlands 

Level of 
involvement 

The  Small  Business  Innovation  Research  (SBIR)  programme  is  a  national 
programme  open  to  business  from  across  the  Netherlands  as  well  as  from  other 
businesses.  Funding  is  available  for  innovative  solutions  for  social  issues, 
particularly  in  the  transport  and  logistics,  renewable  energy,  formal  care, 
safety/security and food sector.30 

Key characteristics  

The programme started in 2004 as a pilot and has since evolved into a full programme, there is no 
planned  end  date.  Through  the  programme  ministries  outsource  socially  relevant  innovative 
research to businesses. The programme is delivered by NL Agency, participating ministries provide 
funding  and  publish  calls  for  tender  through  NL  Agency.  All  calls  for  tender  focus  on  the  desired 
outcome,  rather  than  a  required  specification.  Proposals  from  businesses  are  assessed  by  an 
independent committee that advises the Minister.31 

Rationale 

Working towards the Lisbon objectives, the Dutch government seeks to increase the innovativeness 
of businesses. Public technology procurement is recognised by government as a powerful means to 
increase R&D expenditures. The government acts as a catalyst by procuring innovation, in its role 
as launching customer and through pre-commercial procurement the government can to stimulate 
innovative solutions for social issues (grand challenges). The Dutch SBIR took the  US SBIR as an 
example and is tailored to  the  Dutch  needs,  respecting EU  legal frameworks on procurement and 
state aid. 

Aim 

Through the programme the Ministry of Economic Affairs, Agriculture and Innovation aims to solve 
public  questions  and  concerns  and  to  encourage  especially  start-ups,  newly  established  high 
growth  businesses  and  SMEs  to  carry  out  pioneering  research.  It  seeks  to  promote  the 
innovativeness of businesses and to highlight the importance of commercialisation of knowledge.  

Objectives 

By  procuring  innovative  projects  through  the  SBIR  programme  the  government  promotes  and 
stimulates  the  innovative  capacity  of  Dutch  businesses,  especially  SMEs,  to  solve  major  societal 
challenges. The government sees the scheme as a way to achieve value for money and get quick 
results to societal challenges. The programme also provides the opportunity for government to be a 
first client for new innovative products and services. 

30  

http://www.answersforbusiness.nl/subsidy/sbir 

31 

http://erawatch.jrc.ec.europa.eu/erawatch/opencms/information/country_pages/nl/supportmeasure/sup
port_mig_0005?avan_type=support; NL Agency/NL Innovation SBIR 2011 

58 

 
 
 
 
                                                 
 
 
Costs 

The  ministry  publishing  the  call  for  tender  provides  the  budget,  funding  for  SBIR  is  not  centrally 
decided.32  In  the  first  six  years  of  the  programme  the  total  SBIR  budget  was  EURO  59.6  million, 
the annual budgets are detailed in the table below: 

Year 

2005 

2006 

2007 

2008 

2009 

2010 

Budget (EURO 
million) 

1.1 

3.5 

3.1 

7.4 

18.2 

26.3 

Source: NL Agency/NL Innovation SBIR 2011 

Table 2: SBIR annual budgets 

Side - Type - Interactions  

The  demand  side  programme  encourages  businesses  to  develop  innovations  that  contribute  to 
solving societal challenges on a procurement basis for the Dutch government. 

Interactions with demand/supply side  

The  demand  side  intervention  encourages  businesses  to  develop  innovative  products  or  services 
and thereby effects supply of innovation. 

Demand side 

SBIR projects are procured by the Dutch government via tender and consist of three phases: 

 

 

 

Economic technical and organisational feasibility (budget of up to EUR 50,000 per project), 

Research and development, resulting in a tested prototype, demonstration, limited pilot run 
or pilot project of the product, process or service (budget of up to EUR 450,000 per project), 

Commercialisation of a product, process or service (not publicly financed). 

The government tenders for phase 1 and 2, invitations for phase 2 tender are made on successful 
completion of phase 1. Public funding is not available for phase three, the commercialisation phase 
33  

Businesses of all sizes are eligible for the programme, most businesses that apply tend to be early-
stage SMEs. Applications are assessed by an independent committee that advises the minister that 
published the call. The committee ranks all projects and provides advice to the deciding minister, 
project proposals are ranked based on the following criteria: 

 

 

 

 

 

 

Impact on the societal issue 

Entrepreneurship 

Innovation 

Economic prospects 

Ecological and societal aspects 

Quality of the proposal and the project 

32  

P3ITS, 2011 

33 

http://erawatch.jrc.ec.europa.eu/erawatch/opencms/information/country_pages/nl/supportmeasure/sup
port_mig_0005?avan_type =support, Roos, 2009 

59 

 
 
 
 
                                                 
Successful  businesses  start  their  project  six  to  eight  weeks  after  the  announcement  of  the 
successful  project.  Phase  1,  feasibility  projects  usually  have  a  duration  of  6  months.  Businesses 
that have successfully completed phase 1 are invited to prepare a proposal for phase 2, R&D. The 
assessment criteria for phase  2  are  the same  as for  phase  1 but economic prospects for phase  3 
are given more weight in the assessment.34 R&D projects usually have a duration of 2 years. The 
total  duration  of  projects  that  receive  funding  for  phase  1  and  phase  2  is  around  three  years.35 
Throughout the delivery of the project NL Agency assists businesses with any non-technical issues 
and monitors the progress of the project.36  

The intellectual property rights associated with the projects remain with the business. Royalty free 
use  as well as the right to require licensing to third party suppliers is requested by the procuring 
ministry.  While  the  SBIR  programme  is  subject  to  EU  procurement  rules,  EU  wide  competitive 
tendering  is  not  necessary  because  of  Article  16f  exemption  of  procurement  of  R&D  services. 
General procurement principles e.g. transparency and non-discrimination still apply.37 

Phase 3, commercialisation, is not government funded but offers the government an opportunity to 
act as a large innovation-driver buyer, becoming the first client for the new product or service and 
benefiting from its advantages. 

Supply side 

Through  the  demand  side  programme  businesses  are  encouraged  to  supply  innovative  solutions, 
i.e. products and/or services to societal issues. The programme helps to fund the high-risk phases 
of an innovation and offers the opportunity to work together with other businesses and/or research 
institutes. The SBIR contract guides businesses along the way and gives them a result-orientated 
assignment,  which  helps  to  accelerate  time  to  market  and  increases  their  chances  of  launching 
their  innovation.  The  contract  with  government  also  puts  businesses  in  a  stronger  position  with 
potential partners, clients, banks, business angels and government.38  

Assessment of impacts  

The programme is used by a number of ministries (seven in June 2011), which indicates the wide 
range of themes addressed by the programme. The impact of the programme can be measured by 
the number of innovative products and services developed as a result of the service. Key figures up 
to June 2011 indicate the impact of the programme39: 

 

 

 

 

 

Over 30 SBIR procurements started;  

Over 370 contracts closed;  

About 750-1000 man-year innovation development in SMEs;  

20 completed phase 2 contracts;  

65% of supported businesses bring their SBIR development to market within a year;  

The impact resulting from the new innovations is not currently captures. Businesses that took part 
in the 2010 evaluation reported that without the programme the innovation would not have been 
started, or would have been delayed or postponed. 

Data  from  2010  shows  that  businesses  delivering  SBIR  phase  1  projects  are  mostly  (56%)  small 
businesses with less than ten employees. For phase 2 contracts, the proportion of businesses with 
less  than  ten  employees  is  three  quarters.40  Data  for  the  first  four  years of  the  scheme  (2005  to 
2008) indicates that most applicants are young businesses (less than five years in business).41 

34  

NL Agency/NL Innovation SBIR 2011 

35   Gerritse, 2010 

36   Gerritse, 2010; NL Agency/NL Innovation SBIR 2011 

37  

P3ITS, 2011 

38  

NL Agency/NL Innovation SBIR 2011 

39  

Technopolis 2013 

40   Gerritse, 2010 

41  

Roos 2009 

60 

 
 
 
 
                                                 
Metrics/indicators  

Rationale 

The programme encourages innovativeness of businesses, especially SMEs. The new products and 
services  resulting  from  projects  give  business  the  opportunity  to  grow  and  create  new  jobs  and 
strengthen the competitiveness of Dutch businesses. The projects delivered under the programme 
contribute to solving societal challenges.  

Monitoring and evaluation 

Reports and monitoring studies are completed regularly. A first evaluation was carried out in May 
2007,  based  on  the  data  for  the  first  6  pilots.  A  formal  evaluation  of  the  SBIR  programme  was 
carried out in 2010.  

The  2010  evaluation  focuses  on  input  and  process  aspects  of  the  programme,  an  impact 
assessment  was  not  undertaken  due  to  the  programme  having  relatively  recently  started.  The 
evaluation  was  based  on  a  review  of  the  documents  relating  to  the  calls  for  tender  and  other 
programme documents, interviews and surveys. 

Businesses surveyed as part of the evaluation were satisfied with the design and implementation of 
the programme, including the alignment of the SBIR with their own business processes. Businesses 
were  also  found  to  be  enthusiastic  about  the  opportunity  to  contribute  to  solving  societal 
challenges  addressed  in  the  SBIR  calls.  The  programme  was  see  by  participants  as  a  means  to 
accelerate the time-to-market and to mobilise funding for the first phases of an innovation.  

Ministries  considered  SBIR  as  a  well-functioning  instrument  and  were  satisfied  with  the 
implementation and  support  received by NL  Agency.  It was too early for a full assessment of the 
cost-effectiveness  of  the  programme  because  the  effects  and  impacts  of  the  programme  are  not 
yet clear. However, expectations on results of participants in phase 2 of SBIR are good. 42  

Policy lessons 

The  evaluation  found  that  the  programme  succeeded  in  attracting  the  right  target  group  of 
businesses,  primarily  SMEs  that  had  no  prior  involvement  with  the  departments  or  with  other 
innovation  programmes  took  part.  The  programme  was  found  to  be  successful  in  exploiting  the 
innovative potential of SMEs for contributions to solving societal issues. 

Evaluators  saw  the  programme  as  an  appropriate  instrument  for  SMEs  because  of  its  quick 
turnaround,  low  barriers  for  participation,  and  low  administrative  burdens.  Businesses  very 
favourably commented on the fact that they receive a contract (rather than a subsidy) with 100% 
funding  for  phase  1  and  phase  2.  This  meant  that  the  SBIR  project  was  treated  as  a  project 
delivered  for  a  client,  with  an  obligation  to  deliver  results  and  a  higher  priority  within  the  firm. 
Evaluators  recommended that  NL  Agency  should  monitor  businesses  in  phase  3  to determine  the 
long term  success  of  the  programme.  Government  should  also  explore  which  role it  could  play in 
the  third  phase,  options  include  non-financial  support  to  firms  (SMEs,  start-ups)  and  stimulating 
new  markets  (e.g.  through  regulations,  certification,  standardisation)  and  in  cases  where  the 
government  itself  is  an  important  (potential)  client  the  role  of  the  government  as  first  customer 
should be considered before the SBIR call is published. 

Ministries reported in the evaluation that SBIR is a flexible programme that can be tailored to the 
specific needs of each ministry. Only the Ministry of Defence delivers the programme itself instead 
of  through  NL  Agency  as  the  design  does  not  fit  will  with  the  usual  procurement  process  of  the 
ministry. Reasons for the initial slow take up of the programme by ministries were the unfamiliarity 
with  the  programme,  lack  of  awareness  of  the  value  added,  inexperience  of  dealing  directly  with 
SMEs  and  that  take  up  initially  depended  to  a  large  extent  on  the  efforts  and  enthusiasm  of 
individual civil servants in the Interdepartmental Working Group SBIR.  

Evaluators recommended that the flexibility in the programme allowing for a tailor-made approach 
for  each  SBIR  call  should  be  maintained.  However,  flexibility  should  not  come  at  the  cost  of 
systematic  data  collection  on  implementation  which  will  help  implement  a  systematic  and  more 
intensive learning process in which experiences of those involved in the implementation of various 
SBIR calls are exchanged and shared. Implementation should be kept in one hand at NL Agency to 
allow for continuous learning processes in which experiences with implementing various SBIR calls 
are  shared.  NL  Agency  should  promote  the  programme  at  all  levels  of  government,  involve 
policymaking directorates and management teams.43 

42  

Technopolis, 2010 

43  

Technopolis, 2010 

61 

 
 
                                                 
References: 

Contact details of key person(s) for this policy 

Netherlands Enterprise Agency 

Phone: 0031 88 0424242 

Email: sbirinfo@agentschapnl.nl 

Policy documents, evaluation reports and studies 

 

 

 

 

 

 

 

 

Gerritse,  F.  (2010)  SBIR  PCP  Model  and  good  practices 
http://www.progreast.eu/files/SBIR%20PCP%20NL%202junil%202011%20bratislava1.pdf 

the  Netherlands 

in 

Mostert,  B.  and  Deuten,  J.  (2011)  Mini  Country  Report/The  Netherlands  Thematic  Report 
2011 under Specific Contract for the Integration of INNO Policy TrendChart with ERAWATCH 
(2011-2012) 
http://ec.europa.eu/enterprise/policies/innovation/files/countryreports/netherlands_en.pdf  

NL  Agency/NL  Innovation  SBIR  (2011)  The  power  of  public  procurement:  innovative 
solutions to societal challenges    
http://www.rvo.nl/sites/default/files/bijlagen/SBIR%20brochure%20The%20power%20of%2
0public%20procurement.pdf  

OECD  (2014):  OECD  Reviews  of  Innovation  Policy:  Netherlands,  Preliminary  Version, 
http://www.oecd.org/sti/inno/Innovation-policy-Netherlands.pdf  

P3ITS  (2011)  Pre-commercial  Public  Procurement  for  ITS  innovation  and  deployment, 
http://www.ertico.com/assets/Activities/P3ITS/P3ITS-D2.1-Analysis-of-public-Pre-
Commercial-Procurementv1.8.pdf 

(2009)  SBIR 

Roos,  A. 
http://ec.europa.eu/enterprise/policies/innovation/policy/lead-market-
initiative/files/nl_sbir_en.pdf  

in  The  Netherlands;  a  new  perspective 

for  Europe? 

Technopolis  (2010)  Eerste  evaluatie  Small  Business 
programma’s in Nederland 

Innovation  Research  (SBIR) 

Technopolis  (2013)  Developing  an  evaluation  and  progress  methodology  to  underpin  the 
intervention  logic  of  the  Action  Plan  to  Boost  Demand  for  European  Innovations  – 
ENTR2008/006 

62 

 
 
 
 
 
C.14. Small Business Research Initiative (SBRI) in the UK 

Policy Name 
and URL 

Small Business Research Initiative (SBRI) 
https://sbri.innovateuk.org/  

Promoting 
Institution 

Level of 
involvement 

Technology Strategy Board (TSB) 

Country 
(Region) 

The United Kingdom 

SBRI is a national initiative implemented at multiple governance levels and sectors. 
At the central government level various departments including (not limited to) the 
Ministry  of  Defence,  Department  for  Environment,  Food  and  Rural  Affairs (Defra), 
the Department for Transport  (DfT), the Department  of Energy & Climate Change 
(DECC)  and  the Department  of  Health (DH).  At  the  regional  level,  proactive 
agencies  such  as  the  Welsh  government  are  keen  in  promoting  SBRI  in  their 
localities.  There  are  sector  specific  initiatives  as  well.  For  example,  SBRI  in  the 
healthcare  sector  does  not  only  involve  the  scheme  launched  by  the  DH  but  also 
those initiated by the National Health Services (NHS). 

Key characteristics  

SBRI supports economic growth and enables the development of innovative products and services 
through  the  public  procurement  of  research  and  development  (R&D).  Introduced  in  2001,  SBRI 
earmarks a share of the government’s procurement budget (about 11% of the budget in financial 
year  2007/08).  In  the  2013  spending  review  settlement  the  Government  announced  a  five-fold 
increase  in  funding  for  SBRI,  up  to  £200m  in  2014/15,  and  set  targets  on  spending  for  six  key 
Departments. 

Main aims: 

 

 

 

to connect public sector challenges with innovative ideas from industry 

to support companies to generate economic growth 

to enable improvement in achieving government objectives 

Key objectives: 

 

 

 

 

to  provide  innovative  solutions  to  challenges  faced  by  the  public  sector,  leading  to  better 
public services and improved efficiency and effectiveness 

to generate new business opportunities for companies 

to provide small and medium-sized enterprises (SMEs) a route to market for their ideas 

to bridge the seed funding gap experienced by many early stage companies. 

Side - Type - Interactions (very brief summary – to be developed in the next section) 

Demand-side policy instruments: public procurement 

Supply-side policy instruments: R&D support; intermediary measures 

Intended  interaction  (mainly  from  policy  documents):  Public  procurement  of  R&D  performs 
as a follow-up stage to bridge the gap between R&D and commercialization. 

Actual interaction (from policy evaluations):  Not evaluated yet. During 2014-2015 there are 
two evaluation projects: 

 

 

Evaluation of SBRI Healthcare Programme, commissioned by Eastern Academic Health 
Science Network (EAHSN), undertaken by the Office of Health Economics; 

Evaluation of SBRI, commissioned by Technology Strategy Board (TSB), undertaken by 
Manchester Institute of Innovation Research, Warwick Business School and OMB Research 
Ltd. 

63 

 
 
 
 
 
 
Interactions with demand/supply side  

Interactions appear to have mainly taken the two forms below: 

 

 

Participants  in  demand  side  actions  may  also  draw  on  separate  supply-side  support 
programmes which have been designed and implemented independently of the demand-side 
interventions. 
Beneficiaries  of  the  SBRI,  i.e.  innovative  small  and  medium  sized  enterprises  (SMEs),  are 
very likely to have received supply-side support such as SME R&D funding at earlier stages 
before  SBRI.  Successfully  participating  in  the  SBRI  scheme  can  facilitate  them  to  move 
further in terms of prototype development and/or commercialization towards markets in the 
public sector as well as private sector. 

Demand-side policies may themselves incorporate supply-side elements. 
Although public procurement, a typical demand-side policy instrument, is the main measure 
adopted by SBRI to support SMEs, public procurement associated with SBRI does differ from 
normal procurement of commercialized  products in the sense  that it is of a pre-commercial 
nature and inevitably involves further R&D in response to user specifications. The promoting 
agency,  TSB,  provides  intermediary  support  between  suppliers  and  users  to  facilitate  the 
process of SBRI; if needed TSB provides financial support for public users as well. 

Assessment of impacts  

The immediate impacts generated by SBRI include that it enables the collaboration between small 
innovative  enterprises  and  the  public  sector,  and  the  delivery  of  innovative  solutions  which  can 
contribute  to  the  improvement  of  public  services  and  the  financial  and  technological  capacity  of 
SMEs.  Intermediate  impacts  could  include  the  opening  of  new  business  segments  for  suppliers, 
improvement  of  firm  performance,  improvement  of  public  services  delivered  by  the  public  users, 
and  benefits  for  end  users  (if  different  from  procurers).  Long-term  impacts  could  involve  the 
opening of new markets and socioeconomic development and growth as a result. 

For  firms  which  have  received  R&D  funding  and  other  types  of  supply-side  support,  SBRI  can 
provide a demand pull following earlier policy measures, so that the ‘policy gap’ is addressed and 
demand-side  policies  and  supply-side  policies  interact  in  a  sequential,  complementary  manner. 
During the SBRI process, there is likely to be supply-side policies e.g. additional funding, brokerage 
support  and  intermediation  measures,  whereby  supply-  and  demand-side  policies  are  mutually 
reinforcing. 

Metrics/indicators 

  What is the rationale for public intervention? 

There is a gap between enterprise R&D and final commercialization; the gap for SMEs is perceived 
more challenging than that for larger firms. The public sector can bridge this gap by performing as 
leading yet demanding customers, in the form of pre-commercial procurement. 

  How were the activities expected to lead to desired changes in behaviour? 

It is hoped that the main target groups, public users on the one hand and innovative SMEs on the 
other,  can  take  up  behavioural  change  towards  a  more  open  attitude  to  innovation  and  public-
private  collaboration.  Especially  for  public  users  (government  agencies  mainly),  TSB  hopes  to 
create  such  a  culture  that  the  users  can  identify  unsatisfied  public  demands  whereby  innovative 
solutions can be explored, and innovative solutions further lead to socioeconomic development and 
improvement of public services. 

  What metrics does the logic model suggest would be useful in an evaluation? 
o  Contract value owing to SBRI and its weighting in the firm’s business portfolio; 
o  Corresponding sales revenue and profitability etc. associated with firm performance; 
o  Intellectual property (patents etc.) generated because of the SBRI case. 

Were any collected?  

Not yet. 

Policy lessons 

64 

 
 
 
 
As  addressed  above  no  systematic  evaluation  has  been  done  yet,  although  there  are  two 
evaluation  projects  being  undertaken.  Evidence  of  success  has  thus  far  taken  the  form  of  case 
studies and ‘success stories’, retrievable from https://sbri.innovateuk.org/success-stories. 

The  success  stories  suggest  that  several  factors  played  important  roles  in  making  the  innovation 
happen:  (1)  core  technology  demonstrating  a  firm’s  innovativeness;  (2)  awareness  and/or 
intermediary  body  that  lead  the  company  to  apply  for  SBRI  project;  (3)  the  support  of  TSB 
throughout the SBRI process; (4) clear demand articulation based on the needs of public users. 

References: 

Policy documents, evaluation reports and studies 

 

 

 

 

 

http://erawatch.jrc.ec.europa.eu/erawatch/opencms/information/country_pages/gb/support
measure/support_mig_0036 

http://www.detini.gov.uk/dt1_13_0160607___sbri__-_evidence_pack_-_final.pdf 

http://business.scotland.gov.uk/view/funding/small-business-research-initiative-sbri 

http://www.oecd.org/science/inno/demand-sideinnovationpolicies.htm 

https://www.escholar.manchester.ac.uk/api/datastream?publicationPid=uk-ac-man-
scw:187662&datastreamId=FULL-TEXT.PDF 

65 

 
 
 
 
 
C.15. Top Sectors Initiative  

Policy Name 
and URL 

Top Sectors Policy 

Promoting 
Institution 

Ministry of Economic Affairs 
(Ministerie van Economische Zaken) 

Country 
(Region) 

Netherlands 

Level of 
involvement 

The  Top  Sectors  Policy  is  a  national  policy  focusing  on  nine  sectors  and  a  head 
offices theme. The nine sectors are: 

  Agri-food 
  Chemicals 
  Creative industry 
  Energy 
  High Tech 
  Horticulture and propagation materials top sector 
  Life sciences and health 
  Logistics 
  Water 

Key Characteristics 

In  February  2011  the  Government  of  the  Netherlands  announced  the  top  sector  industrial  policy. 
Nine  top  sectors  in  which  the  Netherlands  excels  globally  were  made  a  government  priority.  The 
head  offices  theme  was  later  added  to  the  nine  sectors  as  a  further  area  of  focus.44  The  policy 
focuses  public  activities  and  resources  on  the  nine  sectors  and  the  head  office  theme  in  order  to 
increase competitiveness.  

Rationale 

The policy seeks to contribute to sustainable economic growth in the Netherlands. The government 
identified a number of areas for improvement that the policy will help to address: 

 
 
 
 
 

Low private R&D investments (1,07% GDP, 2011) 
Limited commercialisation (knowledge-ability-cash) 
Limited connection between education and labour market 
Inflexible, rigid labour market 
Regulatory burden on business 

In 2010 the nine top sectors accounted for 96% of business R&D in the Netherlands and over 80% 
in  2011.  In  2011  these  sectors  contributed  just  under  30%  of  GVA  and  employment  to  the 
economy.  R&D  in  the  Netherlands  will  focus  on  the  top  sectors  ensuring  that  public  research  is 
demand-driven  and  contributes  to  joint  agenda’s.  Products  and  technologies  produced  by  these 
sectors  contribute  to  finding  solutions  to  societal  issues.  The  establishment  of  head  offices  in  the 
Netherlands  helps  sustain  the  country’s  strong  economic  profile,  and  it  also  creates  jobs,  which 
makes it important for all top sectors.45 

Aim 

The aim of the policy is to improve the Netherlands international competitiveness and to place the 
Netherlands  in  the  World  Economic  Forum  Global  Competitiveness  Report  top  5  of  knowledge 
economies by 2020 and to increase Dutch R&D efforts to 2.5% of GDP by 2020.46 

44  

http://www.government.nl/issues/entrepreneurship-and-innovation/investing-in-top-sectors 

45   OECD, 2014 

46  

Arie van der Zwan, 2011 

66 

 
 
                                                 
 
Objectives 

The  first  objective  of  the  top-sector  policy  is  to  leverage  private  sector  R&D.  Government  was 
concerned  that  considerable  public  resources  provided  to  R&D  and  innovation  did  not  appear  to 
lead to further investment from the private sector. The policy seeks to increase the application of 
public research and to place it at the service of the private sector and especially SMEs. 

The second key objective is greater coherence in government policy in order to support businesses 
through a simplified range of interventions tailored to the specific opportunities and constraints of 
the  sectors.  This  will  not  only  apply  to  interventions  focused  on  R&D  and  innovation  but  also  to 
policy areas such as skills and foreign policy. 

Costs 

It  is  difficult  to  determine  the  budget  allocated  to  the  top  sectors  policy,  the  overarching  policy 
comprises  mostly  public  resources  committed  to  other  purposes  that  have  been  aligned  with  the 
top sector approach. The policy is subject to co-funding from the EU and also includes R&D funding 
administered by ministries and sub-national authorities. 

Over the period 2013 to 2016 the Government of the Netherlands estimates that between EURO 1 
billion and EURO 1.1 billion  annually  will be made  available to the top sectors (excluding regional 
and  EU  funding).  Of  this,  only  funding  provided  to  Top  Consortia  for  Knowledge  and  Innovation 
(TKIs) can be clearly identified as additional  funding,  this TKI allowance  is estimated at EURO 50 
million to EURO 130 million a year. Between EURO 50 million and EURO 30 million annually are set 
aside  for  specific  education  and  labour  market  interventions  and  between  EURO  700  million  and 
EURO 900 million annually for research and innovation.47 

Side - Type - Interactions  

With industry representatives at the centre of the co-ordination process, industry demand plays a 
key role in this demand side intervention. Businesses in top sectors also have access to additional 
supply side measures that complement the policy. 

Interactions with demand/supply side  

Demand side 

The policy is characterized by new forms of governance through  ‘top-teams’ comprising high-level 
representatives  from  industry,  public  research  and  government.  These  top-teams  drafted 
knowledge and innovation agendas, including a strategic plan and suggested instruments relevant 
to  the  top  sector  that  they  submitted  to  government  for  consideration.  Themes  that  had  to  be 
covered in the proposed strategic plans are: knowledge and research, foreign policy, education and 
training  and  sustainability.48  The  government  evaluated  each  top  team’s  proposed  agenda,  the 
following criteria were taken into account by government:49 

 
 
 
 
 

Level of ambition 
Degree of commitment of stakeholders 
Degree of openness 
Balance between societal and economic agendas 
Extend to which the objectives can be monitored and evaluated.  

Following the evaluation relationships and  sectoral plans were formalised in the Top Consortia for 
Knowledge and Innovation (TKIs), some top sectors have more than one TKI. These public-private 
partnerships seek to facilitate co-ordination and to rationalise government interventions in order to 
maximise impact. Market and government failures that prevent the top sectors from achieving their 
full  potential  are  identified  and  addressed,  and  R&D  activities  prioritised.  In  the  partnerships  the 

47   OECD, 2014 

48  

http://www.government.nl/issues/entrepreneurship-and-innovation/investing-in-top-sectors 

49  

Arie van der Zwan, 2011 

67 

 
 
                                                 
role of the government is to develop sector specific policies across ministerial portfolios, including 
education, innovation and foreign policy, as well as reduction of regulatory burdens.50  

Supply side 

Businesses  belonging  to  a  top  sector  will,  in  addition  to  generic  instrument,  receive  considerable 
support through the TKI allowance. TKIs have the choice of a mix of instruments to support SMEs 
participation  in  top  sectors.  This  includes  instruments  to  complete  technical  feasibility  studies, 
knowledge vouchers, support hiring experts, R&D co-operation projects, participation in innovation 
performance contracts, networking activities and innovation brokers.  

Collaboration  facilitated  through  the  top  sector  policy  will  also  help  businesses  to  tap  into  public 
research and encourage innovative firms to extend the scope and ambition of their activities to the 
global level.51  

These supply side support mechanisms will provide an incentive to innovate and encourage private 
financial commitment. 

Assessment of impacts  

It  is  too  early  to  assess  the  impact  of  the  top  sector  policy.  The  OECD  reports  that  the  policy 
appears  to  enjoy  broad  acceptance,  in  part  because  of  a  general  understanding  of  the  need  for 
long-term stability in innovation policy. The co-ordination of top sectors and  the  emphasis placed 
on  this  from  the  outset  were  recognised  as  a  positive  feature.  Levels  of  awareness,  engagement 
and enthusiasm from businesses are high in some top sectors and considerable progress has been 
made  in  embedding  the  approach  into  policy  making  and  research  planning.  Of  those  involved  in 
the  drafting  of  action  plans  some  reported  that the  policy  has  created  a  new  positive  dynamic  in 
public-private  co-operation  and  there  are  first  signs  that  the  public  research  system  is  becoming 
aligned with industry in the top sectors. 

The  OECD  report  also  notes  that  awareness,  development  and  commitment  varies  across  the  top 
sectors  as  the  nature  of  co-ordination  varies  among  sectors.  This  is  the  case  especially  for  top 
sectors  consisting  to  a  large  proportion  of  SMEs,  where  more  should  be  done  to  achieve 
representation  of  SMEs  for  example  through  providing  the  opportunity  to  give  their  views  and 
shape  agendas  in  consultations  and  surveys.  The  Dutch  government  has  introduced  special  co-
funding  regimes  and  efforts  are  being  made  to  increase  awareness  across  SMEs.  The  OECD 
recommends  that  experience  and  evidence  on  this  should  be  gathered  as  part  of  the  monitoring 
and evaluation process to facilitate learning and inform policy development. 

Increasing the intensity,  scope and ambition of innovation appears to be a particular challenge in 
parts of the private sector that are  not  covered  by  the top sectors approach. The OECD  suggests 
that extending the approach to other parts of the economy, or at least the lessons drawn from it, 
could strengthen the impact of the policy and help safeguard the long-term dynamism of the Dutch 
economy and innovation system. However, the OECD recognises that the limitations of the sectoral 
focus  are  being  addressed  by  the  Dutch  government  through  the  cross-cutting  themes  (ICT,  bio-
based economy and nanotechnology). There is also increased awareness by the Dutch government 
that  emerging  social  challenges  (particularly  through  alignment  with  the  EU  Horizon  2020 
programme) need to be reflected and to develop the regional planning dimension.52 

50   OECD, 2014 

51   OECD, 2014 

52   OECD, 2014 

68 

 
 
 
 
                                                 
Metrics/indicators  

Rationale 

The  top  sectors policy  was  motivated  by  concerns  over  international  competitiveness,  particularly 
difficulties of Dutch exporters to expand into BRIC markets. The policy recognises the link between 
innovation and export performance and foresees a central role for innovation policy and innovation 
initiatives. It also sets the agenda in education, foreign policy and provides a focus on deregulation 
to facilitate business start-up and streamline the business environment.53 

Monitoring and evaluation 

The  Adviesraad  voor  het  Wetenschaps-  en  Technologiebeleid  (AWT)  has  been  commissioned  to 
advise  the  Ministry  of  Economic  Affairs  on  the  development  of  the  policy  and  will  publish  a 
stocktaking  report  in  2014.  Initial  observations  on  the  policy,  focusing  primarily  on  the  main 
knowledge  and  innovation  pillar,  were  submitted  by  AWT  as  part  of  the  2013  Monitoring  of 
Enterprise Policy report.  

AWT urged the government to continue the policy in light of the strengthened relationship between 
industry,  public  research  and  government  brought  about  by  the  top  sectors.  Several  suggestions 
for improvements were also made by AMT: 

 

 

 

 

 

Improve organisation/co-ordination through more concrete direction provide by the ministry: 
confirm budgets and contract points, provide professional support to assist top sector around 
communication and managing public-private partnerships, clarity on how research agendas 
are constructed, reduce bureaucratic complexity 

Increase SME involvement and provide more guidance on the kind of SMEs that should be 
involved (broad scope vs focus on most innovative firms) 

Invest more in cross-sectoral (societal) challenges as crossovers between the top sectors are 
believed to have huge innovation potential 

Align national and regional policy to avoid misalignment 

Facilitate customisation of top sector instruments54 

The  OECD  recommends  to  extend  the  monitoring  and  evaluation  framework  to  take  account  of 
effects outside the top sectors in order to produce a full social cost-benefit analysis. The impact of 
the  policy  on  the  strong  international  performance  of  Dutch  fundamental  research  should  also  be 
closely monitored to ensure the overall competitiveness of the Netherlands is increased. 

Policy lessons 

The  OECD  suggests  that  the  impact  of  the  top  sectors  policy  could  be  enhanced  by  ensuring 
stronger  representation  of  smaller  and  entrepreneurial  companies.  The  policy  would  also  benefit 
from  extended  coverage  or  at  least  from  sharing  of  experience  and  policy  lessons  with  other 
sectors that present opportunities to improve the intensity, scope and ambition of their innovation 
activities.  

The  top  sector  approach  should  allow  for  a  process  to  identify  possible  new  areas  of  strength, 
ensuring flexibility in the top sectors to respond to societal challenges, emerging technologies and 
changes in global demand. The OECD suggests that care should be taken not to align a too large 
share of public resources for fundamental research with the top sectors. 

Overall, a longer-term vision might help to achieve further nuance and clarity regarding terms that 
can  be  broadly  recognised  and  accepted,  including  specification  of  links  between  the  overall 
strategic vision and its intermediate objectives, and to make a compelling evidence-based case for 
sector selection and for merits of government support.55 

53   OECD, 2014 

54   OECD, 2014 

55   OECD, 2014 

69 

 
 
                                                 
References: 

Contact details of key person(s) for this policy 
Ministry of Economic Affairs: Phone: 0031 77 465 67 67 

Policy documents, evaluation reports and studies 

 

 

 

 

 

Arie van der Zwan (2011) The Dutch Top Sectors approach, 
http://www.consilium.europa.eu/media/1914621/20130417-vanderzwan_nl.pdf  

Mostert,  B.  and  Deuten,  J.  (2011)  Mini  Country  Report/The  Netherlands  Thematic  Report 
2011 under Specific Contract for the Integration of INNO Policy TrendChart with ERAWATCH 
(2011-2012) 
http://ec.europa.eu/enterprise/policies/innovation/files/countryreports/netherlands_en.pdf  

Government 

NL 
innovation/investing-in-top-sectors 

website: 

http://www.government.nl/issues/entrepreneurship-and-

OECD  (2014):  OECD  Reviews  of  Innovation  Policy:  Netherlands,  Preliminary  Version, 
http://www.oecd.org/sti/inno/Innovation-policy-Netherlands.pdf  

PBL  Netherlands  Environmental  Assessment  Agency  (2013):  The  rationale  of  spatial 
economic 
policy 
http://www.pbl.nl/sites/default/files/cms/publicaties/PBL_2013_The-rationale-of-spatial-
economic-top-sector-policy.pdf  

sector 

top 

C.16. Green energy innovation funds 

Policy Name 
and URL 

Promoting 
Institution 

Green energy incentives 

Italian Government – Ministry of Economic 
Development/Ministry for Environment, 
Territory and Sea through the GSE – 
Gestore Servizi Energetici (Italian Public 
Authority for RES). www.gse.it 

Country 
(Region) 

Italy 

Level of 
involvement 

National 
Sector: RES- Renewable Energy Sector 

Key characteristics  

Renewable incentives provided under the Italian legislative regime rank among the highest global 
subsidies  for  RES.  The  main  support  schemes  aimed  at  encouraging  and  promoting  the  use  of 
renewable energies in Italy are divided into three categories: 

 
 
 

Support schemes to promote the use of RES in electricity production 
Support schemes to promote the use of RES in the heating and cooling 
Support schemes to promote the use of renewable energy sources in the transport sector 

Over the last decade, a large amount of the legislature’s attention has been focused above all on 
the  promotion  of  RES  in  electricity  production  compared  to  other  uses.  The  main  incentive 
mechanisms used in Italy, at national level, for the production of electrical energy from renewable 
energy sources in the years 2000-2007 were based on four instruments: 

 
 
 
 

Green Certificates 
All-Inclusive Tariff (for RES plant >1MW; 200KW for wind power) 
Energy Account 
CIP6 (valid only for systems set up before 1999) 

Green  Certificates:  the  Green  Certificates  mechanism,  introduced  in  1999  by  Legislative  Decree 
79/1999, obliges the producers and importers of conventional energy to include in their production 
and imports of conventional energy a percentage of energy from renewable sources starting from 1 
January 2002. When companies did  not  produce  this compulsory share of energy from  renewable 
sources  themselves,  they  could  fulfil  the  requirement  by  purchasing  from  third  parties  an 

70 

 
 
 
 
 
equivalent  number  of  certificates  attesting  to  renewable  production.  Green  certificates  are  issued 
by the GSE, traded between operators on a dedicated market, and handed over to GSE at a fixed 
price.  Pursuant  to  a  law  passed  in  2012  (Decree  6  July  2012)  from  2016  the  GC  regime  will  be 
replaced by a dedicated feed-in tariff, which will be calculated on the basis of the average price for 
the sale of electricity during the relevant year. 

All-inclusive tariff: the all-Inclusive tariff remunerates for energy transferred into the network; the 
values of the tariffs are fixed according to law and vary according to the source.  

Energy Account: this mechanism rewards with a feed-in premium tariff the total energy produced 
by  photovoltaic  schemes  for  a  period  of  20  years56.  Rules  governing  the  tariff  are  set  out  in  the 
“Conto Energia” legislation, which is updated periodically by the Italian legislature. 

The  economic  and  financial  crisis  that  has  hit  Italy  since  2009  has  provided  the  framework  to 
discuss  the  maintenance  and  reform  of  the  incentive  mechanisms  activated  in  the  2000s.  From 
2010, there has been a change in  the  main  support schemes implemented and a decrease in the 
incentives  offered.  Today,  a  new  transitional  phase  has  begun  which,  while  still  continuing  to 
incentivize  the  production  of  renewable  energy  in  different  sectors,  has  led  to  a  reduction  in 
incentives  available  and  changes  in  some  of  the  support  schemes  that  had  distinguished  the 
production of electricity throughout the previous decade. The framework that set the new strategy 
is outlined in Ministerial Decree 06/07/2012.  

Green Certificates: one of the main changes in the support schemes for renewable electricity is the 
replacement of the means of financial support to non-photovoltaic RES carried out in the previous 
decade  with  the  Green  Certificates  system.  According  to  the  new  decree  to  guarantee  a  greater 
predictability and sustainability in the cost of incentives, in addition to a reduction in incentives, it 
is necessary to introduce specific mechanisms to keep the volumes of development under control57. 

As  regards  the  renewable  energies  that  are  not  PV,  it  was  decided  it  was  necessary  to  pass  to  a 
feed-in  premium  tariff,  stimulating  renewable  energy  producers  to  exploit  the  energy  in  the 
electricity  market.  This  change  after  2015  will  result  in  the  transition  from  GC  to  tariff,  and  the 
identification of a single incentive scheme for plants that came into operation after 1 January 2013.  

All-Inclusive  Tariff:  s  regards  the  >1  MW  plants  that  come  into  operation  before  31  December 
2012,  the  norms  on  the  incentives  remains  those  of  the  2008  Financial  Act.  The  incentivisation 
values have been updated by Law no. 99 of 23/07/2009. 

Energy  Account:  from  2008  to  2012,  with  three  successive  Energy  Accounts  (2010,  2011  and 
2012)  new  criteria  were  established to  incentivise  the  production  of  photovoltaic  plants.  The  fifth 
Energy Account (DM 5 July 2012) came into operation on 27 August 2012. Although there has been 
strong opposition from many associations, it extends the requirement for inscription in the register 
to access incentives for all power plants, including  those  of smaller size (from 12kW), with a  few 
exemptions.  Moreover,  while  the  previous  mechanisms  paid  all  the  electricity  produced  by  the 
photovoltaic systems with  a single tariff,  in the fifth Energy Account there are two kinds of tariff: 
an all-inclusive tariff, which applies to the part of the electrical energy fed into the grid, and a tariff 
on  self-consumption  regarding  electricity  produced  by  photovoltaic  panels  and  consumed  onsite. 
The Decree sets a limit of €700 million of annual expenditure for incentives and the mechanism will 
cease to be applied after thirty days from the date of reaching of the cumulative indicative cost of 
6.7  billion  per  year.  The  incentivisation  tariffs  for  photovoltaic  plants  that  came  into  operation  in 
the first  half of  2012 go from  a minimum  of  0.37  euroKwh (for P>5000 with a tariff premium  for 
energy  consumed  onsite)  to  a  maximum  of  0.208  euroKwh  for  1≤P≤3kwh  for  the  All-Inclusive 
Tariff. 

56  

In  Italy  the  Energy  Account  was  introduced  by  the  EU  Directive  on  renewable  sources  (Directive 
2001/77/EC), implemented with the approval of Legislative Decree 387 of 2003. 

57  

This will be done through : 

- 

- 

auctions  for  power  plants  with  a  potential  of  over  5  MW,  with  the  exception  of  hydroelectric  and 
geothermal  plants,  for  which  it  is  appropriate  to  raise  the  threshold  respectively  to  10  MW  and  20  MW, 
considering the reduced number of plants with a potential of over 5 MW built annually, and therefore the 
difficulty is setting up truly competitive auctions; 

national  registers  for  plants  with  a  capacity  exceeding  the  minimum  thresholds  differentiated  by  source 
and  technology,  with  predefined  maximum  volumes  for  each  year  and  technology,  and  with  a  selection 
based on criteria of priority. 

71 

 
 
                                                 
Side - Type - Interactions (very brief summary – to be developed in the next section) 

The national policy for renewables operates through a complex set of incentives which range from 
indirect  regulatory  support  measures,  such  as  feed-in  tariffs  and  fiscal  incentives58,  to  market-
based mechanisms, such as quota obligations and tradable green certificates. 

Interactions with demand/supply side  

The incentives schemes are not adjusted in line with the technology learning curve. The support for 
renewable  energy  is  not  within  the  range  of  production  costs  from  other  technologies.  The  high 
support levels have increased the number of investors involved in renewable energy production. 

Assessment of impacts  

As  a  result  of  strong  government  support  and  co-operation  from  banks  and  other  financial 
institutions, the Italian renewable energy market has increased over the past years and continues 
to  increase.  The  current  legislation  still  provides  incentives  for  investors,  despite  long 
administrative procedures and grid constraints. 

Metrics/indicators 

The registered capacity  of solar photovoltaic has grown at 3000% over the past three years. The 
wind  market  has  also  seen  sustained  high  levels  investment,  with  the  number  of  installations 
increasing by 39 per cent from 2012 to 2013.  

A recent study (Ruggiero - IRES 2012) recorded very good results in terms of installed capacity in 
the electricity sector (i.e. 15000MW in 2008-2012 with a share of final consumption of 26.1%); a 
reduction in the dependence on electricity from the hydrocarbons sector and the creation of green 
jobs linked to the renewables sector in a period of low economic growth and recession. According 
to  a  research  carried  out  by  IRES-CGIL  (January  2010)  “green”  employment  in  the  renewable 
energy  sector  in  Italy,  including  direct  and  indirect  jobs,  amounts  to  over  100.000  employees. 
Another  study  by  IEFE-Bocconi  University  (2009)  estimated  that  total  employment  in  the  field  of 
RES electricity is about 170.000 workers . 

As regards the total volume of resources spent and used in the promotion of RES in Italy it has to 
be  underlined  that the  burden  of  funding  falls  largely  on  the electricity  consumer.  As  a  matter of 
fact,  there  has  been  a  intense  debate  about  the  impact  of  incentives  for  renewable  energies  on 
electricity  prices.  Renewable  energies  have  been  implicated  as  the  main  cause  of  rising  energy 
prices.  To  clarify this  issue,  the  AEEG  (the  Italian  Electricity  and  Gas  Authority)  recently  issued  a 
statement entitled “Electricity: the transparent bill” (2012). This document deals with all the costs 
paid by Italian consumers. According to the AEEG the total annual cost to a “household user” with 
a consumption of 2700 kWh/year and a supply of 3kW amounts to 515 Euro. The cost of incentives 
for  renewable  energy  in  this  expenditure  amounts  to  77.51  Euro/year  (15.04%)  which  67.3  Euro 
(86.9%) is attributable to renewable energy sources while the rest (13.1%) is due to other similar 
technologies59. 

Policy lessons 

The support schemes for renewable energy in Italy can be divided in two phases: the first one was 
characterized  by  powerful  incentives,  especially  with  regard  to  the  electricity  sector.  In  the  years 
after  their  introduction  the  mix  of  instruments  used  led  to  a  rapid  surge  in  production  and 
consumption  of  RES  in  final  energy  uses.  The  second  one,  which  began  in  2011,  led  to  the 
redefinition  of  support  schemes  with  the  aim  of  reducing  financial  spending  on  incentives  and 
achieving a reformulation of the incentivisation instruments in order to provide more support to the 
heat sector.  

A  recent  study  (Ruggiero  -  IRES  2012)  states  that  it  is  possible  to  say  that  the  policies 
implemented have been effective. The social debate is now focused on the issue of whether or not 
to place a ceiling on the incentives and on the number of installations to incentivize. The following 
is a list of the man strengths and weaknesses of the support schemes used:  

58  

59  

RES investments benefit from a rebate on VAT (10% instead of 20%) and from a 10-year corporate tax 
reduction if carried out in Southern regions. 

Source: Public funding for green energy in a context of crisis  - Country report (Italy), S. Rugiero, IRES 
(Institute for Economic and Social Research), December 2012 

72 

 
 
                                                 
As regards the strengths: 

 

 

 

The effectiveness of the system of incentives used: principally, the excellent results achieved 
in terms of installed capacity in the electricity sector; 
The  reduction  of  dependence  on  electricity  from  the  hydrocarbons  sector  with  a  consequent 
reduction in emissions of CO2; 
The creation of green jobs linked to the renewables sector in a period of low economic growth 
and recession. 

However, there are also some weaknesses due to: 

 

 

 

 

Uncertainty  and  the  absence  of  a  medium-long  term  strategy  which  would  give  investment 
certainty  in  all  the  areas  involved  (electricity,  heat,  transport,  energy  saving  and  efficiency) 
and that goes beyond current targets; 
An  incomplete  liberalization  in  order  to  facilitate  the  exchange  onsite  for  each  type  of  plant, 
the direct sale of energy and the ability to create private networks; 
The delay in the development of a system of support for renewable energy in the heat sector, 
which still suffers from a strong foreign dependence for fossil fuel (especially gas); 
The  lack  of  investment  in  distributed  generation  (smart  grids,  etc.)  which  is  better  suited  to 
new technologies that make use of renewable energy. 

Today, there is a new challenge for Italy as there is a necessity to move from a phase in which the 
RES  play  an  “accessory”  role  (in  a  system  focused  on  centralized  production  and  fossil  fuels) 
towards an “integrated system”.  

It is also worth noting that, among the countries that have made most use of incentive policies for 
the development of renewables, Italy is the one that demonstrates the greatest contradictions. The 
extraordinary  growth  of  energy  demand  in  the  photovoltaic  sector  has  led  to  a  dramatic 
deterioration in the trade deficit for technologies for renewable energy.  

Italy shows a deficit in (public) research and in the ability to stimulate and sustain new industrial 
sectors. It is evident then the emergence in Italy of a new kind of foreign energy dependence, but 
one  that  is  related  to  technology.  The  divergence  between  the  Italian  and  European  deficit  in 
renewables technologies highlights the extreme fragility of the development of renewable energy in 
the country. The existence of a foreign constraint may limit the capacity for growth of the economy 
and, therefore, employment within it. 

Another  critical  aspect  relating  to  the  fields  of  renewable  energy  sources  is  the  ability  to  offer 
technological  response  by  the  Italian  industry,  which  in  recent  years  has  not  been  able  to 
sufficiently  adapt  to  the  rapid  increase  in  the  demand  for  components  and  system  ,  greatly 
stimulated  in  turn  by  the  incentives  of  above.  If  on  the  one  hand,  Italy  is  characterized  by  the 
generosity  of  green  energy  tariffs  ,  especially  with  regard  to  electricity  generation  ,  on  the  other 
hand  is  rather  lacking  in  terms  of  policies  to  support  the  growth  of  the  domestic  industry  ,  in 
particular  fastest  growing  sectors  such  as  photovoltaics.  Domestic  demand  for  components  and 
systems  for  installations  from  renewable  sources,  in  fact,  is  still  covered  with  the  predominant 
reliance  on  imports  from  abroad  ,  which  led  to  a  worsening  of  the trade  balance  and  Italian  to  a 
misalignment than the average for other countries Europe. To date, although there is an increase 
in the number of operators in different sectors of renewable sources, the Italian companies tend to 
focus mainly in downstream stages of the supply chain (installation) that are, among others, those 
with lower profit margin. 

References 

  Rapporto rinnovabili 2010-2011, Situazione e prospettive delle fonti rinnovabili in Italia, Centro 

Studio APER (July 2011) 

  IREX  Annual  Report  2013.  Rinnovabili:  l’evoluzione  del  settore  italiano  nel  contesto 
internazionale e l’integrazione nella politica energetica, by Althesys-Strategic consultants (2013) 

  Energie  rinnovabili  ed  efficienza  energetica:  scenari  e  opportunità  .  Quaderni  di  Innovazione,  

Edizione 2013 

  Stato  dell’arte  del  settore  energie  rinnovabili  in  Italia,  report  carried  out  by  INNOVA  for  the 

Italian Trade Commission - ICE (July 2013) 

  Public funding for green energy in a context of crisis  - Country report (Italy), S. Rugiero, IRES 

(Institute for Economic and Social Research), December 2012 

  IRENA- International Renewable Energy Agency- Renewable Energy country profile (ITALY) 

  IRENA-GWEC: 30 years of policies for wind energy- ITALY (pages 105-110) 

  EREC: Renewable energy policy review- ITALY 

73 

 
 
 
C.17. Transformation of the  Greater Manchester Waste System 

Policy Name 
and URL 

 Transformation of the Greater Manchester Waste System 
http://meetings.gmwda.gov.uk/  

Promoting 
Institution 

Greater  Manchester  Waste  Disposal 
Authority (GMWDA) 

Country 
(Region) 

Greater  Manchester, 
England.  

Level of 
involvement 

The Transformation of the Greater Manchester Waste System was promoted by the 
Greater  Manchester  Waste  Disposal  Authority  (GMWDA)  which  is  the larger  waste 
disposal authority in England. It serves and acts on behalf of nine local authorities 
(Bolton;  Bury;  Manchester;  Oldham;  Rochdale;  Salford;  Stockport;  Tameside; 
Trafford).  

Key characteristics  

The Transformation of the Greater Manchester Waste System plan was developed in 2001 following 
the European Landfill Directive (1999) implemented in UK by the National Waste Strategy (2000).  

Aims and objectives of the scheme:  

Replacing current standards of waste disposal with more sustainable practises of:  

 
 
 

Reduction 
Recycling and composting 
Energy recovery from disposed waste  

In this sense, the scheme can be seen as an attempt to target societal challenges and meet policy 
and  economic  needs,  in  particular  the  ones  associated  to  an  increasing  production  of  households 
waste (in 2000 GMWDA was managing around 5% of UK’s total household waste) .  

Following an internal re-organization, GMWDA engaged with the Department of Trade and Industry 
(DTI) as well as DEFRA, the Treasury and the UK Environment Agency, as well as other key local 
stakeholders  including  Local  Authorities,  residents,  NGOs,  and  planners.  Resulting  from  this 
process, GMWDA produced a Waste Management Strategy (GM MWMS 2004) which became a key 
input for the procurement tender specifications. In 2005, GMWDA  received 100£ million from the 
Government Private Finance Initiative, the largest ever waste management contract awarded in UK 
which allowed to embark in a public procurement exercise to substitute landfill waste practices with 
state of the art technologies for waste separation, recycling and composting.  

Side - Type - Interactions  

Demand side instruments: Regulation; Public procurement 

Supply side instruments: Support through public procurement to acquisition of newly developed 
technologies.  GMWA  also  initiated  a  process  of  market  creation  for  recycled  materials  such  as 
paper, cardboard and laminated board packaging.   

Intended  interaction  (mainly  from  policy  documents):  To  fulfil  the  procurement  contract  a 
level  of  interaction  between  GMWDA  and  the  companies  supplying  the  necessary  technology  was 
put  in  place  to  plan  and  create  new  sites  apt  to  the  adoption  of  technology  previously  never 
adopted in UK.  

Actual  interaction  (from  policy  evaluations):  No  evaluation  exercise  has  been  done  yet  but 
local  statistics  on  reduction  of  landfill  disposal  from  50%  in  2001  to  14%  in  2011  suggest  a 
successful outcome of the scheme.  

74 

 
 
 
 
 
 
 
 
 
Interactions with demand/supply side  

Demand-side policies may themselves incorporate supply-side elements.  

An  interaction  between  demand  and  supply  sides  could  be  considered  in  respect  of  the 
technological push for the adoption of innovative technologies for waste disposal. In particular, the 
adoption  and  diffusion  of  state  of  the  art  technologies  following  visit  to  successful  facilities  in 
Germany, France and Italy.  

Another element of interest is the thorough interaction with supply-level stakeholders (such other 
DTI and DEFRA) as well as the involvement of residents by a survey exercise collecting households’ 
data in the nine local authorities.  

Assessment of impacts  

Although assessment and  impact evaluation have not yet being implemented, a tangible outcome 
generated by the policy is the drastic reduction of landfill disposal as well as the introduction across 
the  Greater  Manchester  area  of  innovative  processes  for  recycling  and  composting  and  energy 
recovery.  This  last  element  in  particular  has  created  and  attracted  specialised  skills  to  the  areas 
benefiting from the policy as well as created new markets for recycled materials.  

The sum of these factors can in the long term generate economies of scope towards the production 
and diffusion of new technologies.  

Metrics/indicators 

 

What is the rationale for public intervention? 

Public intervention was required in order to respond to a European regulation.  

The  solution  adopted  by  GMWDA  was  un-proportioned  in  UK  in  terms  of  scale  of  the  action  and 
coordination of actors at the micro, meso and macro level.  

 

How were the activities expected to lead to desired changes in behaviour? 

The activities were implemented in order to set new practices for waste management. This involved 
both  suppliers  of  the  service  as  well  as  producers  (households).  By  addressing  the  problem  of 
disposal the policy has significantly  forced a change in behaviour across all the actors involved in 
the process.  

 

What metrics does the logic model suggest would be useful in an evaluation? 

No metrics were collected  

Policy lessons 

The  Transformation  of  the  Greater  Manchester  Waste  System  is  considered  a  best  practice  case 
study  at  the  UK  level  and  its  emergence  and  evolution  has  been  codified  in  a  number  of  reports 
and academic publications as well as advertised in the specialised journal for practitioners.  

References: 

 
 
 

 

http://meetings.gmwda.gov.uk/  
http://www.mrw.co.uk/ (May 2012) 
Uyarra,  E.  and  Gee.  S.  "Transforming  urban  waste  into  sustainable  material  and  energy 
usage: the case of Greater Manchester (UK)." Journal of Cleaner Production 50(2013) : 101-
110 
Gee,  S.  and  Uyarra,  E.  "A  role  for  public  procurement  in  system  innovation:  The 
transformation  of  the  Greater  Manchester  (UK)  waste  system."  Technology  Analysis  & 
Strategic Management (2013) 

75 

 
 
 
 
 
C.18. European Innovation partnerships 

Policy Name 
and URL 

Promoting 
Institution 

Level of 
involvement 

European Innovation Partnerships (EIPs) 

http://ec.europa.eu/research/innovation-union/index_en.cfm?pg=eip 

European 
General for Research and Innovation 

Commission, 

Directorate 

Country 
(Region) 

European 
member states 

Union 

The supranational policy at European Union level focuses on five themes: 

  Active and healthy ageing 
  Agricultural sustainability and productivity 
  Smart cities and communities 
  Water 
  Raw materials. 

Key characteristics  

In  October  2010  the  Commission  put  forward  a  proposal  to  launch  European  Innovation 
Partnerships  (EIPs).  EIPs  are  challenge-driven,  focusing  on  societal  benefits  and  a  rapid 
modernisation of the associated sectors and markets. They bring together all relevant stakeholders 
at  EU,  national  and  regional  levels,  working  across  the  entire  research  and  innovation  chain.  In 
2010 the first pilot partnership that was set up in the area of active and healthy ageing, there are 
now five EIPs.60 

Rationale 

The need to promote growth, increase efficiency and create new, innovative solutions to critical and 
social  challenges  was  revealed  by  the  recent  economic  and  financial  crisis.  In  areas  where 
government intervention is clearly justified and where a target will be achieved quicker and more 
efficiently by combining EU, national and regional efforts in R&D and demand-side measures EIPs 
are  launched  to  enable  these  improvements.  The  EIP  model  provides  a  strategic  approach  to 
innovation as part of the Europe 2020 strategy.61 

Aim 

The  aim  of  a  EIP  is  to  provide  a  framework  that  brings  together  all  relevant  stakeholders  across 
policies, sectors and borders to speed up innovations which address a major societal challenge, and 
to gain competitive advantages for growth and job creation in Europe.62 

Objectives 

EIPs seek to: 

 
 
 
 

increase research and development efforts 
coordinate investments in demonstration and pilots 
anticipate and fast-track any necessary regulation and standards 
Stimulate demand, in particular through better coordinated public procurement, to ensure 
that any breakthroughs are quickly brought to market.63 

60  

http://ec.europa.eu/research/innovation-union/index_en.cfm?pg=eip 

61  

Aho, E. et al, 2014 

62  

EC, 2010 

63  

http://ec.europa.eu/research/innovation-union/index_en.cfm?pg=eip 

76 

 
 
                                                 
Costs 

EIPs will not receive or attract financial contributions and will not manage funds but are expected 
to drive the aligning of priorities, leveraging investments and initiating future co-operation.64 Each 
EIP brings together a range of stakeholders. It is expected that private partners will contribute to 
the  work  of  the  partnership  and  use  their  own  resources.  Public  funding  at  all  levels  will  be 
allocated  on  the  basis  of  the  existing  procedures  for  decision-making  by  EU  institutions  or  the 
relevant national, regional  or local  authorities.  The EIPs will be considered in the decision-making 
processes  under  the  relevant  EU  funding  programmes  and  initiatives,  including  Framework 
Programme  7/Horizon  2020,  Competitiveness  and  Innovation  Framework  Programme,  Structural 
Funds and Rural Development Funds.65 

Side - Type - Interactions  

The  EIPs  bring  together  stakeholders  to  speed  up  the  deployment  of  major  innovations  by 
committing  them  to  undertaking  supply  and  demand  side  measures  (funding,  regulation, 
standards, procurements etc) across sectors and the entire innovation system. 

Interactions with demand/supply side  

EIPs  are  organised  around  concrete  and  ambitious  targets,  which  have  been  agreed  at  political 
level in areas of societal challenges, commanding broad public and political support.  

EIPs  will  mobilise  and  coordinate  stakeholders  to  facilitate  new  ways  of  working.  They  seek  to 
operate  across  demand  and  supply  and  to  simplify  and  streamline  existing  instruments  and 
initiatives and initiate new relevant actions to address issues such as outdated regulation or lack of 
standards.  Building  on  relevant  existing  tools  and  actions,  EIPs  will  integrate  these  into  a  single 
coherent  policy  framework  where  appropriate.  EIPs  will  leverage  the  demand-side  for  example 
through public procurement across the whole value chain from  research to market. These  actions 
will help to focus resources and political  energies on key political  priorities and  make  it  easier for 
partners to co-operate and reach better results faster.66  

Assessment of impacts  

A  report  published  by  an  independent  expert  group  in  2014  concluded  that  the  EIP  model  is  the 
right approach to help enable further European economic growth and welfare. 

While  thorough  monitoring  and  evaluation  of  individual  EIPs  is  still  outstanding  early  findings 
indicate  that  they  have  supported  coordination  between  initiatives  in  different  countries  and 
regions.  The  expert  group  found  that  EIPs  have  been  effective  in  bringing  together  different 
stakeholders  and  serving  as  an  EU-wide  observatory  of  practice  in  innovation.  They  have  been 
successful in deepening the dialogue between policy-makers and innovators and in establishing an 
effective  mix  of  longer-term  systemic  targets  and  short-term  operational  goals.  The  future  will 
show whether EIPs can also contribute to a simplification of instruments to support innovation.67 

Metrics/indicators 

Rationale 

The policy seeks to address the weaknesses in the European research and innovation system that 
were identified in the Innovation Union as considerably hampering the discovery or exploitation of 
knowledge which often prevents the entry of innovations into the market place. These weaknesses 
are: under-investment in knowledge generation and diffusion, framework conditions which are not 
sufficiently  innovation-friendly,  and  fragmentation  and  duplication  of  efforts,  low  involvement  of 
users and insufficient alignment of public actions. 

64  

EC, 2010 

65  

EC, 2012 

66  

http://ec.europa.eu/research/innovation-union/index_en.cfm?pg=eip 

67  

Aho, E. et al, 2014 

77 

 
 
                                                 
Monitoring and evaluation 

In May 2013 the European Commission set up an independent expert group to assess progress and 
evaluate  the overall  performance  of  the  EIPs.  The  group  was  also  ask  to  make  recommendations 
for  improvements  of  the  functioning  and  potential  impact  of  the  established  EIPs,  and  to  identify 
criteria for future EIPs.68 

With  EIPs  still  being  at  an  early  stage  a  thorough  monitoring  and  evaluation  process  of  EIPs’ 
individual impact has not yet been established.  

Policy lessons 

The  governance  structure  of  the  EIPs  was  seen  to  be  effective  in  getting  their  early  activities 
underway.  However,  the  EIPs  were  hindered  by  the  lack  of  a  single  dedicated  structure  at  the 
European Commission to deal with EIPs and the different views of Directorates. Future performance 
of EIPs could be improved by a stronger commitment of the member states and clearer channels to 
introducing new stakeholders.69 

“The expert group makes eight recommendations: 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

Adopt improved criteria for launching new EIPs: The EIP approach should only be applied to 
societal challenges that meet pre-defined criteria. These include the existence of a clear need 
or  prospects  for:  a)  breakthrough  innovation  and  systemic  solutions,  b)  wide-ranging 
partnering, c) European level action, d) new European competitive advantages. 

Provide an architecture for systemic change: The EIPs must aim to achieve systemic change 
guided  by  a  plan  for  how  to  move  from  the  present  system  to  the  preferred  one.  This  will 
help  guide  what  kinds  of  interventions  are  needed  and  in  what  manner  by  showing  how 
linkages  and  interdependencies  between  elements  of  the  system  need  to  be  reshaped  or 
restructured. 

Deploy a professional Design Team  to guide  the  work of the EIPs:  A dedicated professional 
Design Team is needed to build and help deliver on an architecture for systemic change. This 
team should be nominated personally by the President of the European Commission and be 
answerable at a political level. 

Adopt  an  ecosystem  approach  to  delivery:  An  ecosystem  approach  to  delivery  should  be 
followed focusing on mobilising demand, experimentation and diffusion. Focus should be on 
creating a single market  for innovation through  demand side actions and strengthening the 
diffusion of innovation. 

Build  a  level  playing  field  proactively:  A  level  playing  field  needs  to  be  ensured  in  a  pro-
active  fashion  including  entry  of  new  and  relevant  actors  and  guarding  the  EIPs  against 
capture by vested interests. 

Adopt  clear  indicators  for  success:  Clear  indicators  need  to  be  defined  to  monitor  and 
evaluate success. The EIPs need to have a better sense of prioritisation where measurement 
of  progress  has  to  relate  to  systemic  change,  rather  than  the  intensity  of  actions  per  se. 
These indicators should allow the Council to monitor the effectiveness of the Member States’ 
commitment towards the EIPs. 

Secure  committed  high-level  leadership  and  adopt  an  effective  governance  model:  A 
committed high-level leadership and an effective governance model have to be in place with 
the EIPs being placed at the heart of the EU innovation policy and becoming a core element 
of  the  work  plan  of  the  President  of  the  Commission.  Individual  Commissioners  should 
continue  to  take  ownership  of  each  EIP  supported  by  a  dedicated  structure  at  the 
Commission. An active role for the Competitiveness Council has to be envisaged. 

Improve  the  stakeholder  model:  Stakeholder  commitment  has  to  be  ensured  by  creating 
synergy  between  the  work  of  the  different  Action  Groups  within  the  EIPs,  having  Member 
States  implement  national  support  groups  and  more  actors  from  outside  of  Europe  being 
brought into the framework.”70 

68  

Aho, E. et al, 2014 

69  

Aho, E. et al, 2014 

70  

Aho, E. et al, 2014 

78 

 
 
                                                 
The expert group is of the opinion that the implementation of these recommendations is needed to 
turn the EIP approach into what it was meant to be from the start, a thoroughly different model of 
engaging stakeholders for breakthrough innovation and systemic change in Europe. 

References 

Contact details of key person(s) for this policy 
European Commission, Directorate General for Research and Innovation 
Directorate B — Innovation Union and European Research Area 
Unit B1 — Innovation Union Policy 
Contact: Peter Dröll 
E-mail: Peter.Droell@ec.europa.eu 

Policy documents, evaluation reports and studies 
 

Innovation 

Aho,  E.  et.al.  (2014)  Outriders  for  European  Competitiveness  European  Innovation 
Partnerships  (EIPs)  as  a  Tool  for  Systemic  Change,  Report  of  the  Independent  Expert  Group 
http://ec.europa.eu/research/innovation-
union/pdf/outriders_for_european_competitiveness_eip.pdf#view=fit&pagemode=none  
European  Commission  (May  2012)  Complementary  Frequently  Asked  Questions  regarding 
European 
http://ec.europa.eu/research/innovation-
union/pdf/eip_faq_may_2012.pdf#view=fit&pagemode=none  
European  Commission  (December  2010)  Innovation  Union,  Frequently  Asked  Questions 
regarding 
2020 
Innovation 
European 
http://ec.europa.eu/research/innovation-
union/pdf/eip_faq_december_2010.pdf#view=fit&pagemode=none  
Innovation 
http://ec.europa.eu/research/innovation-union/index_en.cfm?pg=eip 

Partnerships 

Partnerships 

Partnerships 

Innovation 

European 

website: 

Europe 

Union, 

under 

 

 

 

79 

 
 
 
 
 
C.19. Lead Market Initiative (LMI) 

Policy Name 
and URL 

Lead Market Initiative (LMI) 
http://ec.europa.eu/enterprise/policies/innovation/policy/lead-market-
initiative/index_en.htm#h2-3  

Promoting 
Institution 

European  Commission 
Member States) 

(together  with 

Country 
(Region) 

EU Member States 

Level of 
involvement 

Supranational (EU) 
The LMI covers the following market sectors: 
  eHealth 
  Protective textiles 
  Sustainable construction 
  Recycling 
  Bio-based products 
  Renewable energies. 

Key characteristics  

The  LMI  is  the  European  policy  for  6  important  sectors  that  are  supported  by  actions  to  lower 
barriers to bring new products or services onto the market. 

The  LMI  for  Europe  was  launched  by  the  European  Commission  following  the  EU's  2006  Broad 
based  innovation  strategy.  The  scope  of  the  LMI,  the  selection  of  the  six  markets  and  the  action 
plans  were  approved  in  the  Competitiveness  Council  (mainly  composed  of  the  Ministers  for 
European  Affairs,  Industry  and  Research  from  the  Member  States)  of  May  2008.  Also,  at  this 
meeting,  Member  States  expressed  their  strong  interest  and  commitment  to  create  the  right 
framework to foster lead markets. The 2006 Aho report presented the concept of lead markets. It 
recommended the development of innovation-friendly markets in a more targeted way by creating 
conditions  to  facilitate  the  translation  of  technological  and  non-technological  innovation  into 
commercial products and services. 

The underlying rationale was based on the concept of a that a lead market, i.e. the development of 
a  market  of  a  product  or  service  in  a  given  geographical  area,  where  the  diffusion  process  of  an 
internationally  successful  innovation  (technological  or  non-technological)  first  took  off  and  is 
sustained and expanded through a wide range of different services. 

A 'lead market' is not necessarily the country or market where the innovation was first developed, 
or even used for the first time. 

The LMI was a demand-side innovation policy (as opposed to supply-side funding), thus it did not 
have a dedicated budget. 

Side - Type - Interactions 

The six lead market areas were selected on the basis of intense stakeholder consultations: all share 
the following chartacteristics: 

 
 

 
 

They are highly innovative; 
They  provide  solutions  to  broader  strategic,  societal,  environmental  and  economic 
challenges; 
They already exhibit a strong technological and industrial base in Europe; 
Compared  to  other  markets  in  Europe,  they  depend  more  on  the  creation  of  favourable 
framework conditions through public policy measures. 

For  each  market,  a  3-5  year  plan  of  action  was  formulated.  The  intended  benefits  to  European 
citizens were identified as including positive impacts on growth and employment (the six identified 
areas  were estimated as representing  three million jobs and €300bn by 2020) and also improved 
access to enhanced goods and services of high societal value. 

80 

 
 
 
Support was articulated through a mix of demand-side policy measures in the fields of legislation, 
standardisation  and  labelling,  public  procurement  and  complementary  activities.  A  diagrammatic 
representation of the activities carried out is provided in the Annex, together with an overview of 
the  number  of  measures  undertaken,  which  serves  to  illustrate  the  complexity  of  the  initiative 
overall. 

In  2011,  an  evaluation  was  conducted.  This  focused  on  the  development  of  each  of  the  markets 
measured  by:  market  growth,  employment  rate,  turnover,  growth  in  procurement,  number  of 
patents/trademarks,  etc.71  and  progress  in  implementing  the  action  plans  of  each  of  the  6  lead 
markets  in  the  chosen  policies.  With  regard  to  assessing  the  progress  of  the  action  plans,  it 
considered (following Edler et al (200972)), 1) the relevance and coherence of the intervention; 2) 
the  effectiveness  of  the  intervention  (particularly  in  terms  of  the  specification  of  objectives  and 
implementation  process); 3)  efficiency;  4)  sustainability  of  the  intervention;  5)  value-added;  and 
6) utility. 

Interactions with demand/supply side  

The LMI was based on a number of policy instruments which related to: 

 

 

 

Framework conditions 
o 

Legislation proposals (new legislation or modifications) and regulatory measures to 
coordinate regulation that will foster innovation and remove regulatory burdens and 
obstacles to innovation 
Development of more consistent standardisation, labelling and certification to 
encourage the diffusion of innovative practices and facilitate the development of lead 
markets; 

o 

Demand-side instruments: 
o 

Promotion of the use of public procurement to foster the uptake of innovative products 
and services; 

More traditional supply side policy instruments: 
o 

Other complementary actions to support the impact of the above instruments including 
business and innovation support services or financial support instruments for supply 
side activities. 

Assessment of impacts  

The website entry relating to the Final Evaluation of the LMI73 notes the following conclusions: 

 

 

 

 

71  

72  

The  LMI's  novel  architecture  was  an  innovation  in  itself.  This  resulted  in  interactions  with 
new  groups  (some  of  whom  are  not  used  to  operating  at  an  EU  level),  and  using  untried 
procedures to deliver at both policy and implementation levels.  

The major strength of the LMI was its potential to focus on a relatively restricted number of 
inter-related  policy  issues.  The  choice  of  instruments  (public  procurement,  standards, 
regulation and 'complementary actions') was appropriate, and provided justifiable EU-added 
value in most instances.  

Action  plans  have  mostly  delivered,  and  promising  results  were  evident.  There  is  a  clear 
advantage in being able to address inter-related issues in regulation, procurement, standards 
and complementary actions as a distinct package. The challenge now will be the follow-up of 
the actions, so that they can have a lasting impact.  

The  choice  of  the  6  markets  was  just;  they  were  relevant  for  the  EU  level,  had  (Single) 
market characteristics, contributed to common (societal) challenges and could be supported 
by  the  proposed  toolbox  of  instruments.  In  some  cases,  the  choice  of  the  markets  did  not 
correspond to the Member States' priorities.  

CESS/Oxford  Research,  2011.  Final  Evaluation  of  the  Lead  Market  Initiative:  Final  Report.  Publications 
Office of the European Union: Luxembourg. 

Edler,  J.,  L.  Georghiou,  E.  Uyarra,  D.  Cox,  J.  Rigby,  Nugroho,  Y.,  Blind,  K.,  2009.  Monitoring  and 
Evaluation Methodology for the EU Lead Market Initiative: A Concept Development. Manchester Institute 
of Innovation Research: Manchester. 

73  

http://ec.europa.eu/enterprise/policies/innovation/policy/lead-market-initiative/final-eval_en.htm  

81 

 
 
                                                 
 

 

 

 

 

 

 

 

 

 

 

 

Since the LMI is a demand-side innovation policy (as opposed to supply-side funding), it did 
not have a dedicated budget. Much has been achieved with very limited budgets (estimated 
total of €153m from FP and CIP funds over 4 years). It is highlighted as a particular success 
that  the  LMI  triggered  a  number  of  calls  under  the  FP7  and  CIP  to  support  the 
implementation of action plans; demonstration and innovation-type projects, market studies, 
standardisation mandates, and networks of public procurers.  

Industry  representatives  and  other  stakeholders  have  made  a  significant  contribution 
throughout,  and  they  have  become  important  drivers  in  3  sectors  (bio-based  products, 
eHealth and protective textiles). 

Interestingly,  the  Executive  Summary  of  the  Final  Evaluation  Report  itself  lists  a  slightly 
different set of conclusions, namely: 

The  LMI  should  be  understood  as  a  set  of  pilot  actions  aiming  to  shift  the  basis  of  an 
important  area  of  policy.  Its  major  strength  was  targeting  interrelated  policy  areas  for 
promising markets that would not otherwise be picked up by other policy frameworks. 

The  LMI  fell  short  of  the  ambition  of  the  Aho  Report,  which  had  raised  expectations.  The 
scope of the Action Plans was necessarily more restricted, especially given the limited nature 
of the budget available. Furthermore, the Initiative involved experimenting with various new 
procedures. 

The  six  markets  initially  chosen  as  targets  continue  to  show  a  marked  potential  for  further 
growth.  

Varying degrees of success were achieved in relation to the different Action Plans. 

It is important that there should be follow-up to the results achieved under the Action Plans. 
In particular the full impact of the work of the procurement networks will only be felt, if there 
is effective dissemination and take-up of the initial results.  

The  co-ordination  with  the  Member  States  via  the  EPG-sub  group  has  faced  difficulties.  For 
various  reasons  going  back  to  the  inception  of  the  Initiative,  the  framework  for  Member 
States interaction was not sufficiently developed. 

Engagement  with  industry  was  generally  more  successful  than  with  Member  State 
authorities. 

The  use  of  demand  side  policies  to  target  certain  markets  is  growing  at  national  level,  but 
developments in the Member States can best be described as being in parallel to those of the 
Initiative.  

For the markets targeted, the fact that the LMI operated at a European level brought added 
value,  though  this  would  not  necessarily  be  the  case  for  all  markets.  Regulation  stemming 
from  European legislation and the benefits to be derived from  public purchasing from  more 
than one Member State are significant factors in all cases.  

 

Examples of good practice are provided in case studies annexed to the evaluation report. 

Metrics/indicators 

The  underlying  rationale  of  this  approach  is  that  public  procurement  can  contribute  to  the 
emergence  of  so-called  “lead  markets”  (Uyarra,  E.,  2012),  understood  as  “regional  markets  with 
specific attributes that increase the probability that a locally preferred innovation design becomes 
internationally successful as well”. 

As  noted  by  Uyarra  (2012),  since  the  objectives  of  policies  aimed  at  transforming  markets  or 
creating  lead  markets  are  by  definition  new  they  are  consequently  difficult  to  identify  by 
conventional  measures.  For  example,  in  regards  to  the  case  of  public  procurement,  in  order  to 
understand its influence on innovation it is necessary to identify the target group, i.e. those firms 
that provide goods or services to or on behalf of the public sector. An important challenge here is 
the  lack  of  reliable  data  on  public  procurement.  A  further  complication  to  understanding  the 
influence  of  procurement  on  innovation  is  the  fact  that  public  sector  suppliers  have  both 
government  and  private  sector  clients,  making  it  problematic  when  disentangling  the  effect  of 
public expenditure from overall demand. Furthermore, it is necessary to differentiate the effect of 
government contracts from other forms of government support when looking at organizations such 
as  third  sector  providers.  Differentiating  procurement  expenditure  from  other  sources  such  as 
subsidies  or  transfers,  adequately  categorizing  public  sector  spend  by  sector  or  functional  areas, 
and  capturing  the  full  extent  of  procurement  activities  in  a  traditionally  very  fragmented  public 
sector all comprise key challenges associated with procurement data (Uyarra, 2012). 

82 

 
 
In terms of identifying and measuring metrics, Uyarra (2012) also notes that the evaluation of the 
LMI  utilises  a  number  of  measures  of  impact  such  as  employment,  turnover,  patents  and 
procurement  activity.  However,  in  actuality,  the  evaluation  suggests  that  only  20%  of  the 
anticipated  growth  in  the  markets  could  be  attributed  to  the  Initiative,  except  for  the  renewable 
energy sector (which is more dependent on the establishment of targets for the share of renewable 
energy). Moreover, it recognizes the difficulty of attributing causality, especially when dealing with 
instruments  designed  to  improve  the  market  environment.  Uyarra  also  finds  that  the  evaluation 
acknowledges  a  lack  of  evidence  of  impact  for  the  LMI  with  regard  to  demand-side  instruments 
such  as  public  procurement.  A  final  complication  is  that  “the  activities  considered  may  not  be 
attributable  to  the  lead  market  initiative  but  to  other  policy  developments”  (Uyarra,  2012).  As 
noted  by  the  authors  of  the  Final  Evaluation  of  the  LMI  Report  “in  each  case,  there  is  no  single 
policy measure that could remove the barriers that block the emergence of strong demand in these 
markets. Only a combination of different public measures and incentives can make a difference and 
consequently this is an area where a more global approach and the transfer of experience and good 
practice are particularly relevant”. 

The Evaluation of the LMI had the following overall objectives: 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

To create an overview of the actions implemented under the action plans and the current and 
expected progress in their implementation. 

To assess the commitment of stakeholders in implementing the activities of the action plans 
(public and private stakeholders as well as the Member States) 

To  assess  the  level  of  alignment  between  existing  or  new  activities  by  Member  States  and 
those of private sector stakeholders, building on an assessment of new demand-side policies 
by the Member States. 

To  measure  the  level  of  policy  coordination,  both  within  and  outside  the  European 
Commission, attained by the LMI. 

To  assess  the  rationale,  implementation  and  achievements  of  the  LMI  as  a  whole  and  of 
selected actions.  

To assess the impact of the LMI in reducing identified obstacles in the markets.  

To  assess  the  discernable  economic  impact  of  the  LMI  in  areas  such  as  market  growth, 
employment rate, turnover etc. 

Objective 5 above can therefore be seen as an approach towards testing the original logic model of 
the  LMI,  while  Objective  7  seems  more  specifically  concerned  with  the  assessment  of  metrics. 
Objectives  2,  3  and  4  all  relate  in  general  terms  to  anticipated  effects  in  regard  to  changes  in 
behaviour as a result of the programme. Unfortunately, as the LMI Evaluation Report states: “The 
high  level  objectives  of  the  Initiative  have  never  been  stated  in  the  form  of  a  clear  Intervention 
Logic  and  consequently  there  is  some  mismatch  between  the  perceived  promotion  of  a  demand 
side approach to innovation policy and the actual processes of the Initiative”. 

Since the LMI incorporated a broad range of activities, no specific set of  metrics was appropriate 
to  enable  an  assessment  of  its  performance  across  all  its  desired  outcomes  and  objectives.  The 
range  of  activities  promoted  included,  as  an  illustration  from  the  Action  on  Bio-based  Products: 
Establish  an  advisory  group,  including  Member  States  and  industry;  Mapping  of  bio-refineries  in 
Europe;  Establish  a  network  between  public  purchasers  of  bio-based  products;  Encourage  Green 
Public Procurement for bio; Elaborate new European standards for bio-based products; Conduct an 
information  campaign  via  different  media  with  a  focus  on  SMEs,  or  in  the  eHealth  actions: 
Strengthen  R&D  on  ICT  for  Health  in  FP7  and  in  Member  State  programmes;  Strengthen 
cooperation between national and community R&D testing and pilots, involve users in RTD actions. 

83 

 
 
 
 
Policy lessons 

The  LMI  Final  Evaluation  Report  points  to the  following  recommendations  which  may  be  taken  as 
policy lessons arising from the initiative: 

 

 

 

 

 

 

 

 

 

 

 

 

A co-ordinated  approach to the demand-side stimulation  of innovation  ought  to continue  to 
have  an  important  place  in  innovation  policy,  while  the  links  with  supply-side  measures 
should continue to be strengthened.  

There  are  significant  advantages  to  be  found  in  pursuing  demand-side  stimulation  of 
innovation by focusing on specific markets with the potential to become lead markets. 

 These  considerations  should  influence  the  development  of  successor  initiatives  to  the  LMI. 
There  continues  to  be  a  case  for  separate  initiatives  in  some  markets,  but  even  where 
demand-side  measures  are  mainstreamed  into  broader  policy  frameworks,  maintaining  the 
coherence  and  interaction of  ‘lead  market actions’ will make their overall contribution more 
effective. 

The full intervention logic of LMI-type measures needs to be elaborated so that objectives at 
all levels are evident and transparent. This should be supported by a clearer specification of 
the longer-term results and outcomes anticipated and by an effective monitoring of progress. 

Effective follow-up of actions requiring further developments that formed part of the LMI is 
essential for the credibility of the Initiative. Further action in the Bio-based products market 
is particularly urgent, but is also needed in the e-health, protective textiles, and sustainable 
construction areas.  

The case for demand-side actions, especially relating to public procurement, remains strong 
in the ‘busy’ policy areas of recycling and renewable energy.  

The  initiative  would  have had  greater  impact,  particularly  in  the  procurement area  if  it  had 
had a dedicated budget. Furthermore, while much can continue to be done within a restricted 
budget, many of the follow-up actions identified require more substantial funds.  

A  balanced  approach  to  support  for  the  procurement  of  innovation  needs  to  be  developed 
across all phases of the innovation cycle.  

It  really  is  essential  to  engage  the  Member  States  in  the  LMI  or  similar  processes.  At  a 
minimum,  this  should involve  a  clear  definition  of  action that  has  to  be taken  at  a  national 
level to complement EU action.  

The lead market approach also makes sense at a national level and in certain circumstances, 
at  a  regional  level.  A  greater  engagement  of  Member  States  that  have  so  far  not  adopted 
demand side stimulation of innovation  might be  achieved through its inclusion in Structural 
Fund guidelines and in the elaboration of Cohesion policy.  

The effective engagement with industry has been one of the successes of the LMI. There are 
many  lessons  to  learn  from  the  methods  adopted,  but  perhaps  the  most  important  to 
develop  would  be  the  structured  interaction  between  purchasers  and  suppliers,  both  within 
and beyond the public procurement framework.  

The promotion of end-user interaction with research - from the shaping of objectives to the 
detail of the work undertaken and its subsequent application  – is a major advantage of the 
lead  market  approach,  providing  positive  links  between  the  demand-side  and  supply-side. 
This should be exploited further. 

References: 

Contact details of key person(s) for this policy: None located 
ENTR-LMI@ec.europa.eu 

Policy documents, evaluation reports and studies: 

 

 

 

CESS/Oxford Research,  (2011).  Final  Evaluation  of  the Lead  Market Initiative: Final Report. 
Publications Office of the European Union: Luxembourg. Available at: 

http://ec.europa.eu/enterprise/policies/innovation/policy/lead-market-initiative/final-
eval_en.htm 

Uyarra,  E,  (2012).  Review  of  Measures  in  Support  of  Public  Procurement  of  Innovation, 
Compendium of Evidence on the Effectiveness of Innovation Policy Intervention, NESTA.  

84 

 
 
 
 
ANNEX: Metrics/Indicators 

Figure 5: Overview of the Actions of the LMI 

Figure 6: Number of actions in each Lead market sector 

85 

 
 
 
 
 
 
 
 
 
C.20. SME standardisation initiative 

Policy Name 
and URL 

Financial  support  to  SMEs  involved  in  standardization  committees  at 
European and International level 

http://les-aides.fr/fiche/bZNqDX5G2e3B/dgcis/aide-aux-pme-
participant-aux-travaux-de-normalisation-europeens-et-
internationaux.html 

Promoting 
Institution 

French Ministry of  Economy and Finances, 
Directorate  General  of  competitiveness, 
industry and Services (DGCIS) 

Country 
(Region) 

France 

Level of 
involvement 

National,  all  main  industrial  sectors  addressed.  The  programme  target  is  SMEs.  
These  are  involved  via  business  networks,  clusters  or  industrial  federations  that 
bring together a minimum of 30 SMEs.  Some limited numbers of SMEs could also 
be direct beneficiaries of the policy support. For the last 2 years, the target of the 
policy moved from traditional industrial sectors to sectors of services. 

Key characteristics  

The  policy  aim  was  to  provide  financial  assistance  over  a  three  year  period  to  intermediary 
organisations  representing  SME  groupings  to  participate  in  standardization  committees  at  a 
European  and  International  level.  This  support  was  principally  channelled  through  professional 
federations and business networks such as clusters. The eligible expenditures include the costs of 
the time spent in participating in the standards workshops and committee meetings and associated 
travels costs of the expert(s) mandated by the federation or cluster. The grant covers 50% of the 
eligible expenditures.  

This broad policy action exists since 2000’s and was part of a policy mix aimed at supporting  SMEs 
in  their  international  development  and  innovation  competiveness.  The  take  up  and  use  of 
international standards and the participation in international standard committees were considered 
a key element in this policy mix and clearly have an impact on innovation and stimulating demand.  
In  addition  by  actively  participating  in  standard  committees  it  is  possible  to  address  supply  side 
factors.  The  current  policy  is  shaped  under  this  frame  since  2007  with  a  budget  about 
1M€ per year for an average of 10 funding actions each year. The average funding by action 
is 150k€. In 2014, due to financial constraints, the budget has been decreased to 500k€ funding 5 
actions.  

Side - Type - Interactions  

The  rationale  of  the  policy  aims  to  maintain  and  reinforce  the  innovation  and  competitiveness 
capacities of French SMEs, through a twin approach:  

 

 

First  :  to  help  SME  to  better  understand  and  then  use  standards,  as  an  important  part  of 
their business and of constraints they should respect ;  

Secondly:  to  shape  standards  according  to  their  own  products  and  specificities  by  pushing 
them into standards.  

This  policy  was  shaped  by  focussing  on  the  numerous  supply  and  demand  benefits  SMEs  could 
expect by participating in standard design and processes. Key points include:   

 

 

Maintain or increase competitive advantage thanks to :  
o 
o 

Better information than their competitors on the content of standards 
 Better  understanding  of  the  technical  content  which  facilitates  its  application  and 
improve SME’s ability to ensure its products respect  standards 
Anticipation of the evolution of the regulations  
Better  control  of  interoperability  and  compatibility  of  SME’s  products  with  others 
products/systems that fit with customers’ expectations.  

o 
o 

Access  new markets at national, European and International level thanks to:  
o 

Collaboration and networking fostered during standardization processes 

86 

 
 
 

 

Better information about market trends and strategic evolutions 
Benchmarking of good practices and experiences of other companies 
Ease with which to enter new markets thanks to market harmonization. 

o 
o 
o 
Disseminate and exploit innovation outputs thanks to  
o 

Influence on technological content of standards which depend of size of SME, but also 
of its engagement and strategic role into the standardization committees.  

Increase credibility and visibility  
o 

Standards  are  considered  as  a  guarantee  of  quality  by  clients  and  customers.  Better 
use of standards thus provides opportunities to increase sales and market shares and 
hence influence supply factors.  

Interactions with demand/supply side  

This  policy  is  thus  addressing  both  demand  side  and  supply  side  via  a  combination  of  direct 
financial support to SMEs (supply side) but as representative of group of SMEs in the same 
sector (a condition to be eligible to the support is that the expert working with the standardization 
committee  should  represent  at  least  30  SMEs),  which  benefit  also  from  standardization  activities 
(demand side).  

Depending  on  the  beneficiaries  (SME  directly  involved  in  the  standardization  process  or  SMEs 
indirectly  beneficiaries),  the  nature  of  benefits  are  different,  focusing  on  pushing  innovation, 
developing  network  and  collaboration  activities  on  one  side,  and  taking  benefits  of  a 
better understanding and better coherence  between standards and SMEs specificities on 
the other side. They are both expected to produce the same impact: maintain or improve SME’s 
competitiveness.  

The figure below illustrates the different supply (in red) or demand (in green) side factors linked to 
this policy action. 

Figure 7: logical framework of the policy 

87 

 
 
 
 
 
Assessment of Impacts  

An  evaluation  of  this  policy  was  carried  out  in  2011  to  measure  the  actual  effectiveness  of  the 
policy as well as its relevance to the needs of SME’s.  

Standardization  is  a  complex  process  that  impacts  upon  companies  and  often  as  an  external 
constraint  on  their  products  (requirement  to  follow  standards,  especially  in  sectors  with  a  high 
degree of control such as health, children’s products, construction, etc.). It can also be considered 
as  an  opportunity  to  disseminate  their  own  innovations  and  do  business  with  others  (acquire  a 
position  of  leadership  and  impose  its  standards/processes  upon  to  competitors  but  also  on  the 
demand actors (i.e. purchasers). 

Among  the  main  results,  the  evaluation  highlights  that  the  participation  from  SMEs  is  driven  by 
three main considerations:  

1. 

2. 

Develop  new  market  opportunities.  This  corresponds  to  an  offensive  and  proactive 
position  to  push  disruptive  innovation  into  standards,  and  participate  to  create  new 
standards on sectors or activities not yet regulated.  

Reinforce  competitiveness.  This  corresponds  to  a  defensive  position,  and  can  be  related 
to  an  evolution  of  trends  and  external  constraints  (from  outside  Europe  for  instance)  to 
protect  SMEs interests.  

3.  Maintain  competitiveness.  This  corresponds  to  a  defensive  position  and  business 
intelligence  activity  to  be  aware  of  the  evolution  of  standards  to  react  quickly  and  avoid 
losing time and money with lack of standards conformance.  

The evaluation shows that the different situations are not exclusive, and the same enterprise could 
encounter one or another situation during its development.  

Financial  support  for  expert  participation  is  required  due  to  the  important  effort  that 
standardization processes required (in terms of time, especially when assuming a key role such as 
president  or  secretary  in  a  technical  committee,  and  in  terms  of  budget,  the  standardization 
processes can require worldwide travel) that individual SMEs could not cover alone. The evaluation 
showed  that  the  support  (50%  of  the  investments)  allowed  SMEs  to  be  more  involved  and  to 
interact with the standards process for longer periods.  

The evaluation also showed that by supporting the participation of a limited number of experts on 
behalf of a group  of  SMEs  it  was  possible  to  have  an  impact  on  a  much  wider    group  and 
foster innovation of all concerned SMEs.  

The  results  of  the  evaluation  also  showed  that  the  mode  of  operating  via  a  “group  action”  is 
particularly  relevant  to  SMEs  innovation  needs  and  capabilities.  In  fact,  even  if  standardization 
impacts  importantly  SMEs  activities,  it’s  hard  –especially  for  the  smallest  –  to  have  enough 
resources  and  time  to  participate  in  standardization  committee.  The  intermediation  via  industrial 
federations or business networks/clusters is also seen as relevant and efficient at the sector level, 
enabling French companies to defend their competitive advantage in the global market.  

Finally,  raising  the  awareness  about  the  importance  of  standards  and  information  of  a 
large set of SMEs is one of the main impacts of this type of supply side policy actions. 

On the contrary, this mode of operating could deserve single interests of the small number of SMEs 
directly involved in standardization which could defend their own interest prior to sectors’ interests 
(particularly in the situation of disruptive innovation).  

Finally,  the  results  of  the  evaluation  showed  that  this  policy  doesn’t  interact  with  other  “supply 
side”  policies  aiming  at  supporting  economic  development,  export,  competitiveness,  research  and 
innovation, etc. One of the recommendations was to develop more synergies among these policies 
to  increase  the  efficiency  of  the  policy  especially  to  disseminate  information  and  mobilize  more 
collaborative  projects  among  enterprises.  Several  tentative  have  been  undertaken  especially  with 
policies supporting SMEs at individual level on one side, and policies targeting sectors on the other 
side.  But  until  now  no  concrete  links  has  been  made,  expect  communication  and  dissemination 
about the support opportunity to SMEs expressing needs of standards.  

88 

 
 
 
 
Metrics/indicators  

 

What is the rationale for public intervention? 

The policy rationale stems from a government desire to enhance the competitiveness of SMEs and 
provide a range of innovation support measures. The participation and influencing of standards are 
often seen as a barrier for SMEs especially in  terms of their  internationalisation.   Standards  were 
also seen as a lever on both supply and demand factors given their ability to shape future markets 
but also ensure current products remain competitive. 

 

How were the activities expected to lead to desired changes in behaviour? 

The  policy  focussed  on  mobilising  SMEs  via  their  industrial  federations  or  business  networks  (i.e. 
people they  can  trust).  But  taking  relatively  small groups  (30  companies) it has  been  possible  to 
create a critical mass of interested SMEs. Internationalisation actions and success stories linked to 
standards  can  also  have  a  wider  impact  if  the  industrial  federations  participate  in  dissemination 
actions.  By  helping  to  shape  new  standards  the  experts  have  influenced  demand  factors.  The 
implementation of new standards or ensuring SMEs products and services are in line with standards 
clearly creates new markets for SMEs. 

Policy lessons 

The  policy  lessons  illustrated  by  this  case  study  highlight  the  interesting  interactions  between 
supply  side  and  demand  side  factors  linked  to  the  product  and  innovation  standards 
processes.. The direct support is individual (the grant fund time and travel of a specific individual 
designated as experts), but the eligibility  conditions impose that at least 30 SMEs are represented 
for each funded action. This ensures a much broader and sectoral impact which can have an impact 
on a greater number of SMEs. The type of approach allows the policy maker to target an important 
number  of  SMEs,  at  sector  level  and  with  a  reasonable  budget.  It  also  fits  well  with  SMEs 
expectations, as the great majority cannot or do not wish to play an active role in standardization 
processes  but  need  to  be  aware  of  their  evolution  to  maintain  and  increase  their  competitive 
advantage.  

References: 

Contact details of key person(s) for this policy: Muriel Freyssinet; 
muriel.freyssinet@finances.gouv.fr Tél. : 01 44 97 32 38 

Policy documents, evaluation reports and studies:  

 

 

 

Evaluation  of  group  actions  supporting  SMEs  in  their  participation  in  European  and 
International  standardisation  activities  (“Etudes  d’évaluation  des  actions  collectives 
d’accompagnement  des  PME  dans 
travaux  de  normalisation  européens  et 
internationaux”), evaluation carried out by inno TSD in 2011-2012 

les 

ETSI  White 
http://www.etsi.org/images/files/ETSIWhitePapers/WP_No_6_SME_FINAL.pdf 

Participation 

Paper 

SMEs 

No. 

6, 

of 

in 

Standardization, 

NORMAPME: improve standards for SMEs: http://www.normapme.com/fr/page/284/normes-
et-pme  

89 

 
 
 
 
 
 
 
 
 
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This  first  policy  brief  presents  an  overview  of  the  wide  set  of  demand  and  supply  side 
innovation  policies  both  within  the  EU  and  elsewhere  in  order  to  identify,  classify  and 
characterize  the  various  measures  implemented  in  different  contexts  and  their 
combination.  It  is  based  on  a  detailed  literature  review  of  demand  and  supply-side 
innovation  policies  and  the  analysis  of  20  international  cases  of  innovation  policies, 
instruments  and  tools  selected  as  representative  of  good  practices  to  address  demand 
side and/or to combine or interact with supply side approaches.  

The  cases  studies  have  been  selected  to  cover  a  large  number  of  countries  (in  and 
outside  Europe)  and  sectors  (including  Health  and  Energy)  and  depending  on  the 
availability of information (especially of evaluation reports). 

Studies and reports 

Doi: 10.2777/43249