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# 52013SC0242

**COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the participation of the Union in a Research and Development Programme jointly undertaken by several Member States aimed at supporting research performing small and medium-sized enterprises /\* SWD/2013/0242 final \*/**

  

Table of Content

1.     Introduction  3

2.     Procedural issues and consultation of interested parties  5

2.1.      Organisation and timing  5

2.2.      Consultation of
interested parties and expertise  6

2.3.      Consultation of the IA
Board  9

3.     Problem definition  9

3.1.      European SMEs – problem
definition and the need for intervention at EU level 9

3.2.      Lessons learned from
the current Eurostars  13

3.3.      Eurostars-2 in the
context of research for SMEs and on the European Research Area  17

4.     Objectives  20

4.1.      General objective  20

4.2.      Specific objectives  20

4.3.      Operational objectives  20

5.     Policy options  21

5.1.      Options  21

5.2.      Discarded option: EU
financial support only via ERA-NET  24

6.     Analysing the Impacts  24

6.1.      Impact on
administrative burden and simplification potential 24

6.2.      Critical mass  26

6.3.      Leverage effect 27

6.4.      Innovation Impact 29

6.5.      Economic Impact 29

6.6.      Social Impact 30

6.7.      Sensitivity analysis  30

7.     Comparing the Options  31

7.1.      Comparison of the
options  31

7.2.      Comparison of the
options in terms of effectiveness, efficiency and coherence  31

7.3.      Preferred option  32

8.     Monitoring and evaluation  33

8.1.      Monitoring  33

8.2.      Impact monitoring  35

8.3.      Evaluation  36

9.     ANNEXES  37

Annex 1: SMEs & R&D: comparing the EU and the US  38

Annex 2: The Eurostars Model 42

Annex 3: Eurostars 1- Key results  44

Annex 4: Eurostars 1 - Success stories  50

Annex 5: Papers and studies quoted in the present Impact assessment
report 53

Annex 6: List of main consultation/expert report documents cited
throughout the entire IA document and their weblink. 55

Annex 7: glossary and abbreviations  56

1.           Introduction

Small and medium-sized enterprises (SMEs) –
firms with fewer than 250 employees, with annual turnover of less than €50
million, and independent of larger enterprises – make up the backbone of the
European economy and have the potential to contribute
significantly to creating more growth and jobs in the European Union (EU). SMEs represent more
than 98% of all businesses in the EU[1].

Across the EU, there are around 20.7
million SMEs employing more than 87 million people (67% of the total
employment, and in some key industries accounting for as much as 80% of all
jobs), thus being responsible for the creation of one in every two jobs. In some regions, SMEs are practically the only private-sector
employer. This underlines their social, in addition to their economic
importance.

Amongst those SMEs, innovative R&D
performing SMEs represent a very dynamic sub- group which can highly contribute
to growth and jobs, even more if engaged in transnational R&D
collaboration. To do this, the right conditions have to be in place:
availability of funds to be invested in the high-risk R&D activities; the
possibility to access and exchange knowledge beyond their national borders; the
freedom to operate in any field considered valuable to them and a transnational
competition which can favour excellence.

However, several problems prevent these
conditions to be realised: a number of market failures prevent SMEs to easily
access the necessary private funding for their R&D and existing national
R&D programmes very seldom accommodate transnational collaborations and are
not sufficiently synchronised and interoperable. Also a programme specifically
dedicated to transnational R&D performed by R&D intensive SMEs, did not
exist at EU level.

Based on this analysis, a concept for such
a programme was developed which gave rise to the establishment of the ‘Eurostars’ Joint Programme (hereinafter “Eurostars”). In 2008, 32[2]
European countries, wishing to have a coherent approach at European level in
the field of R&D performing SMEs, took the initiative within the context of
Eureka[3],
to set up the joint programme Eurostars. The objective of this programme is to
support R&D performing[4]
Small and Medium-sized Enterprises (SMEs)[5]
by co-financing their market-oriented trans-national research in bottom-up
manner and by providing them with a legal and organisational framework which
favour transnational competition leading to the selection of the best projects
for funding.

With the Decision[6] of 9 July 2008 of the European
Parliament and the Council, the European Union participates financially in
Eurostars by way of Article 185 TFEU (ex Article 169 EC) with the aim to
increase the impact of the joint programme. The EU pays a financial
contribution amounting to a maximum of one third of the effective contribution
of the participating Member States and the associated countries, within a
ceiling of 100 M€[7]
for the period 2008-2013. The original budget for Eurostars for the six year
period 2008-2013 was 400 M€.

Eurostars is implemented through a
dedicated implementation structure, the Eureka Secretariat (ESE), which is
responsible for the execution of the programme, in particular for the
organisation of the calls for proposals, the co-ordination of the eligibility,
peer-review evaluation and selection of projects, the monitoring of projects
and the allocation of the EU contribution.

The governance system of the programme
involves also the Eurostars High Level Group (HLG), composed of 33 EUREKA High
Level Representatives and an observer from the European Commission, competent i.a.
to supervise the implementation of the Programme and to approve the raking list
of Eurostars project to be funded; the Eurostars Advisory Group (EAG) advising
the ESE on the execution of the Programme and the National Project Coordinators
(NPCs) i.a. responsible for project generation at local level and
follow-up. The National Funding Bodies (NFBs) are then responsible for providing
funds to their own country project participants in the ranking list and for
monitoring the project.

Such a system, the ‘Eurostars model’ (see Annex
1), combines a centralized management and decentralised entry points: central international
and independent peer review evaluation of the projects (with a common set of evaluation
and eligibility rules) run by the ESE in Brussels, combined with ‘local’
support to project participants in the application and in the funding phase provided by the NPCs and the NFBs based on a
binding ranking list and national earmarked budgets. The model is designed to
optimize the coordination among the national programmes for R&D performing
SMEs while remaining close to final beneficiaries.

An interim evaluation[8], conducted in 2010 by a Group
of Independent Experts chaired by Ms Laperrouze, former Member of the European
Parliament and Vice-President of the ITRE Committee, recognised the value of
Eurostars concluding that it is a good programme, which meets its objectives and
adds value to European R&D performing SMEs. The same view is expressed by
the European Council, in its conclusions on 31 May 2011[9] on the Commission’s interim
evaluation report adopted in April 2011[10],
when it  “welcomes the view of the Group that Eurostars is well aligned
with the objectives of Europe 2020, complements well the opportunities offered
to SMEs in FP7 for international cooperation and has proven to be attractive to
the target group by reaching successfully European R&D performing SMEs”;
“welcomes the recommendation of the Group to continue with Eurostars beyond
2013" and “will consider its continuation in the overall context of the
future Common Strategic Framework for Research and innovation Funding.”

Since then, the programme has continued to
raise an increasing interest from SMEs. The total number of applications was 2600
in September 2012. The success rate has at the same time gone down from 42% in
2008 to 19% in 2011 as the number of applications has increased over time[11]. The programme has therefore
supported a good number of R&D performing SMEs in their transnational
activity, but there is clearly still a possibility to increase the impact if
certain conditions (operational and financial) are met.

Eurostars will come to an end in 2013, in
line with the end of the 7th Framework Programme.

On 22 June 2012, the Eureka Ministerial
Conference in Budapest endorsed a document (hereinafter “the Budapest
Document”) declaring the strong interest of Eureka in supporting the continuation
of Eurostars in a reinforced version (hereafter ‘Eurostars-2’). The Budapest
document sets out a common vision and two main objectives for Eurostars-2:  a
‘structural-oriented’ objective to deepen the synchronisation and alignment of
the national research programmes in the field of funding (a central element
towards the realisation of the ERA by the member countries) and a
‘content-related objective’ to support R&D performing SMEs engaging in
transnational research and innovation projects and to become the preferred R&D
performing SME platform in Horizon 2020.

The Eurostars countries have also started
to express their financial commitments, which in January 2013 amounted to an
overall countries’ contribution to Eurostars-2 almost tripling the current
Eurostars countries’ commitments. The Budapest document invites the EU to
participate in Eurostars-2.

The Commission proposal for Horizon 2020[12] allows for a continuation of
Eurostars-2, by foreseeing a dedicated activity for research-intensive SMEs in
‘Innovation in SMEs’, which “will support the next stage in the Eurostars
scheme implemented in partnership with Member States”.

Within this context, this Impact Assessment examines the most
appropriate course of action.

2.           Procedural
issues and consultation of interested parties

2.1.        Organisation and timing

The
Directorate-General for Research and Innovation is the lead DG for this
initiative.

Preparation of the Eurostars Impact
Assessment (IA) involved the following procedural steps:

·
Developing a Roadmap describing the process
(2012);

·
Setting up an inter-service Impact Assessment
Steering Group (IASG) to oversee the process (2012-2013);

·
Consultation of stakeholders and interested
parties through a variety of methods (2008 - 2012);

·
Carrying out the IA analysis making extensive
use of quantitative and qualitative evidence (2012-2013);

·
Presenting the findings to a wide constituency
of Commission DGs (IASG, Research & Innovation Family DGs, User DGs) as
well as external experts (2013);

·
Submitting the Eurostars IA report to the IAB.

Members of the IASG include: SG, DG BUDG,
DG ENV, DG ENTR, DG CNECT, DG AGRI and DG ENER. Two IASG meetings in 2012
contributed at large to the planning and roadmap for the preparation of the IA
report, in particular concerning the policy options and the relevance of Eurostars-2
to other DGs. The Art. 185 Coordination Group led by DG RTD contributed to the
structure and argumentation of this IA.

2.2.        Consultation of interested
parties and expertise

An extensive number of consultations have
been performed during the last three years on Eurostars and its future
development. They have covered all affected stakeholders. Comments have been
received i.a. on the definition of the main problems and barriers, on
issues linked to subsidiarity and on possible future options and their impacts.

2.2.1.     Consultation of Eurostars
potential and actual final beneficiaries (SMEs and Research Institutes)

The opinions of the target population of
Eurostars (namely SMEs but also research institutes, large companies…) have
been collected through a number of surveys[13],
case studies[14],
projects final reports[15].
These have addressed both those organisations concretely involved in Eurostars
projects (either funded or not funded) or those simply registering to the Eurostars
site.

The answers collected through the above
consultations provide a wide picture of the motivations and barriers to
participation in Eurostars projects, of the expectations and the problems that
the programme should address, and of advantages and disadvantages of the
programme. The stakeholders have expressed their opinion on the impact of the
programme and of the projects according to their own experience (funded or not
funded projects) in qualitative and quantitative terms, providing also
indication of the additionality of the programme itself.

The answers show that
participating organisations gain direct benefit both in terms of turnover
generation and in terms of strategic impacts, such as access to new markets,
creating new partnerships and increasing relevant company know-how. The three
main motivations to participate in a Eurostars project according to the
majority of the respondents are to develop new products, processes or services;
to get public funding in support of R&D and to obtain support for a
consortium with a real cooperative value. Barriers indicated by most of the
respondents were Eurostars eligibility criteria, the funding rules and the
preparation of the consortium agreements.

The additionality of
Eurostars is also demonstrated: the majority of the projects would be abandoned
without Eurostars funding, while those continuing without funding were characterized
by smaller size of consortium, overall budget, R&D budget, number of
countries involved, project ambitions on job creation and turnover growth.

2.2.2.     Consultation
of participating countries and implementing bodies (Eurostars National High
Level Representatives –HLRs and National Funding Bodies –NFBs).

HLRs and of the NFBs are the main actors
involved in the strategic and operational implementation of the Eurostars
programme in each participating country: their opinion has been collected
through surveys[16]
and direct interviews[17]
and is also embedded in the key documents which have led to the design of
Eurostars-2 discussed in different governance bodies[18]. These consultations have
focussed on issues linked to the implementation and impact of the ongoing
programme and on the viability of the Eurostars and Article 185 model in the
future, as well as its possible developments in the framework of the EU support
landscape in terms of target groups, budget and implementation modalities.

The latest consultation of HLR/NPC was run in
November 2012 and specifically addressed the main issues of the impact
assessment (problem definition, subsidiarity, policy options and impact)
related to a future Eurostars-2, with two third 28 EUREKA HLRs and/or NPCs replying.

The vast
majority of the respondents to the last consultation agrees on the following:

· the option for Eurostars-2 as a “New reinforced partnership” is very
suitable and would bring more impact in “enhancing competitiveness of R&D
SMEs” ,

· the most relevant objectives of Eurostars-2 are the “Increased
growth and competitiveness of R&D SMEs” and to “introduce new products,
processes and services”,

· the most relevant actions needed at EU level are “adding leverage
effect to public and private funding to R&D performing SMEs” and to “ensure
integration and coordination of national programmes supporting R&D
performing SMEs”,

·
the most relevant problems Eurostars-2 can tackle
are “the difficulty for R&D performing SMEs to reach the market” and the
“market failures and barriers for SMEs”.

2.2.3.     Open
consultations

A number of
open consultations have been run through different means, both through online
open surveys and through open events as follow-up to these on-line
consultations. In particular, the Commission did run

·
An open public consultation on Art. 185 and SME
support measures as part of the public consultation on the “Green Paper on a
Common Strategic Framework for EU Research and Innovation Funding” – European
Commission, February – May 2011.

In this public consultation, two sets of
questions provided the possibility to give opinions on Eurostars and its future
in the following Framework Programme, namely those referring to Art. 185 and
those referring to the SME support. Eurostars was addressed or mentioned in 70
of the 849 position papers responding to the Green paper.

According to an analysis made on the “mentions of Eurostars in the
green paper consultation”, there were 107 mentions of Eurostars by 70
organizations out of 849 position papers (e.g. 8%). The mentions were positive
for more than 80% of the organisations.  The negative quotes (10%) were mainly
on the synchronization issues. Other negative remarks were on Member
States commitments, harmonization of funding rules, budget level and time to
contract. These issues in the report have been mentioned in the chapter of
‘lessons learnt’ from the interim evaluation (through its
recommendations) and in the ‘achievements’ chapter.

The above issues have
been addressed during the lifetime of Eurostars 1 and will continue to be
addressed in Eurostars-2 with the reinforced partnership option through the
measures to be put in place for the achievements of the operational objectives.

The Green paper open consultation was
followed-up by two open Workshops on “Innovation in Small and Medium
Enterprises” in Brussels[19].
The purpose was to go deeper in the debate launched with the Green paper
consultation.

·
The public Workshop on 21 June 2011 was
addressed mainly to experts in R&I and SMEs matters coming from European
and national SME and industry associations and from SME support organisations
and wider stakeholders such as R&I institutions and academia. The Workshop
had 70 participants.

·
The public Workshop on 12 July 2011 was
addressed to Member States via the FP7 SME Programme Committee, participants
from governmental bodies suggested by ERAC[20]
and SME National Contact Points. The Workshop had 80 participants.

The above consultations asked for
opinions on Eurostars in the overall context as well as more specifically on
its scope and on the way to enhance synergies between national and regional
research and innovation programmes, including by way of Art. 185.

The workshops’ discussions
led to two main conclusions on the scope of a future Eurostars-2: firstly, Eurostars-2
should continue with the same target group (R&D performing SMEs); secondly,
there was no support by the workshop participants to the idea of enlarging the
scope of Eurostars also to non R&D performing SMEs since the number and
size of national programmes supporting other kind of SMEs (as Research for the
benefit of SMEs) was not sufficient to form a critical mass and to set up a
joint programme according to art 185 TFEU.  .

Other public consultations, such as the
public consultation on the ERA framework (European Commission, September –
November 2011)[21]
with its part on cross-border operation in research (in particular joint
research programmes such as Eurostars), and the following public Annual Joint
Programme event in November 2011, were organized to collect experiences and
opinions to formulate recommendations for the design of future versions of
instruments (ERA-NETs, ERA-NET PLUS initiatives, Art. 185 initiatives and JPIs)
capable of realizing the ERA and tackling societal challenges. A specific
session of the event was dedicated also to Eurostars.

2.2.4.     Interim
evaluation in 2010

An interim evaluation has been conducted in
2010. Further description of this interim evaluation is given in Chapter 3
below.

2.3.        Consultation of the IA Board

The Impact Assessment
Board gave the following overall opinion to the draft IA (version of 4 February
2013):[22]

"The report should be
improved in several important respects. Firstly, it should put Eurostars-2 more
clearly in the context of research for SMEs and describe how it differs from
and complements other support programs, such as the new SME Instrument. It
should then focus the problem definition on the policy choices concretely
available for Eurostars-2, given that key parameters have been already set in
the Horizon 2020 program. This analysis should be better informed by evaluation
findings. Secondly, the report should define more specific objectives, so that
it will be possible to evaluate if the implemented Eurostars-2 has generated
the intended effects. Thirdly, the report should focus the options on how to
improve the effectiveness and efficiency of Eurostars-2 programme management
and governance. The expected administrative cost reductions for beneficiaries
and authorities should be quantified. Finally, the report should better present
the stakeholder views explaining which stakeholders were more critical, on what
issues and how these concerns have been addressed."

3.           Problem
definition

3.1.        European SMEs – problem definition and the need for
intervention at EU level

In the context of increasing globalisation,
economic growth and job creation in Europe crucially depend on a renewal of the
European economic fabric towards sectors which are tomorrow's markets and where
Europe can build
sustainable competitive advantages based on its highly educated workforce.

The growth of
innovative and knowledge-intensive firms is a key channel through which such structural
change can happen. However, there is lack of such firms' dynamics in Europe. This is especially visible when the EU is compared to the US: in the US more than in the EU many knowledge-intensive firms were able in the last decades to
develop, grow rapidly and become key economic players, thanks to the success of
their research and innovation activities (EC 2007, O'Sullivan 2007, Cincera
& Veugelers 2010).

The lack in Europe of
such fast-growing firms (Bravo-Biosca, 2011) is a key bottleneck to European
economic performance, as fast-growing firms play a central role in the overall
employment growth and in the productivity growth[23] (Acs, Parsons, &
Tracy 2008, Audretsch 2002, Autio, 2007, Birch et al. 1997, Henrekson & Johansson 2008, Hölzl 2006, Storey 1994). It is thus essential for fostering growth and jobs creation in the EU
that more European SMEs turn into growing innovative firms and are able to
become major economic players on knowledge-intensive global markets, thanks to
successful research and innovation activities.

The research intensity of SMEs and the role
of SMEs in the lack of innovation dynamism in the EU vs. US is further
elaborated on in Annex 1.

To be successful, research and innovation
activities require more and more the cooperation of a multiplicity of actors.
Taking into account notably the increasing complexity of technological
development, fewer firms are able to "go it alone" (von Hippel 1988,
Thether 2002, Becker and Dietz 2004).

This
is of course even more the case for SMEs. R&D collaboration is essential
for them:

·
to access expertise which cannot be efficiently
generated in-house, such as new technological knowledge and technologies which
are complementary to their own field of specialisation,

·
to reduce and sharing costs, as well as risks
linked to technological/market uncertainties, to achieve scale and scope
economies,

·
to increase the speed of reaction to rapidly
evolving markets and technological opportunities.

In Europe, as the increasing technological
complexity requires more and more access to expertise which are not available
inside national borders, R&D collaboration very often need to be
transnational. Moreover, concerning specifically SMEs, the key importance of
transnational R&D collaboration has also to be seen in relation to the fact
that their internationalisation is central to their successful development and
growth[24]: international R&D collaboration has a key role to play to enhance
SMEs access to markets beyond their national borders, notably by enabling them
to absorb market-related tacit knowledge and know-how of their partners
(Hladlik 1988, Teece 1992, Sakakibara 1997).

Furthermore, the existence of market and systemic failures leading
to a socially sub-optimal level of private funding of R&D and justifying
public support to R&D activities is well documented (EC, 2011). For SMEs
depending on external funding, specific market failures inhibiting the adequate
provision of private funding are exacerbated.

For example, commercial banks generally perceive the
financing of R&D projects conducted by SMEs as too complex and risky. Three
reasons are often cited. Firstly, the financing partners of SMEs face an information
asymmetry between themselves and the companies. The providers of funding do
not have the same level of information and understanding with regard to the
technology concept of R&D projects in SMEs and are thus not able to
appropriately assess the complex technologies and the associated risks.
Secondly, the market risk which is linked to new, innovative products
and services following the R&D is difficult to evaluate because market
acceptance cannot be verified and is difficult to estimate. Thirdly, banks find
it difficult to finance R&D and innovation projects, because of the lack
of collateral caused by the high share of soft investments, for example the
salary for researchers, and the tailor made equipment, as for example
laboratories.

This “financing gap” is all the more important in a
fast-changing knowledge-based economy because of the speed of innovation.
Innovative and R&D performing SMEs with high growth potential, many of them
in high-technology sectors, have played a pivotal role in raising productivity and
maintaining competitiveness in recent years. But R&D and innovative
products and services need investment to flourish. If SMEs cannot find the
financing they need, brilliant ideas may fall by the wayside and this
represents a loss in potential growth for the economy.

Taking into account both

·
that SMEs can take out from
transnational R&D collaboration particularly important benefits for their
development and growth[25],

·
that the market failures
inhibiting the provision of adequate private funding for R&D carried out by
SMEs are also particularly important,

it is not surprising that
many empirical studies have found out that public support to  transnational
R&D collaboration of SMEs is a particularly effective type of public
support (see i.a. Ortega-Argilés, Vivarelli and Voigt, 2009;
Moncada-Paternò-Castello and Cincera, 2012).

However, public intervention exclusively at Member States level is currently inappropriate
because of both the levels of support provided and the lack of interoperability
and synchronization between Member States programmes. National research and
innovation efforts are considerable fragmented and compartmentalised and there
is almost no support for transnational collaboration: according to estimates by
the Commission, trans-nationally coordinated public funding in Europe
represented around 12% of national GBAORDs[26] in
2010, of which 7.6% for FP7 activities, 2.5% for the activities carried out by
the ESA, 1% for other transnational performers (such as EUREKA) and 0.8% for
joint programmes implemented by Member States, including those supported by or
co-funded by the European Commission, such as Article 185 activities.[27]

The most important barriers to an efficient
intergovernmental approach in this area is that only very few national programme
cycles are synchronised and use a joint international peer review. The low
level of cross border co-operation in research and innovation programmes
implies that Europe is not using opportunities to enhance the quality and
impact of its research and innovation. Inventions resulting from international
cooperation have on average a higher impact than purely national ones. Better
coordination of policies would help to target public investments more
efficiently and reduce fragmentation.

To summarize, considering the identified
problems, there is a clear case for EU intervention: markets alone do not
deliver a sufficient level of R&D, in particular not by R&D performing
SMEs; market failures create a “financing gap” where R&D performing SMEs do
not have access to sufficient funds and Member States acting alone will not be
able to make the required public intervention. The total investments in R&D
of some Member States are comparatively low and are absent when referring to
support to transnational collaboration.

There is therefore a need for EU intervention
which can bring a clear added value: this means an action which can have a positive
effect on the funding at national level (leverage on public funding), and that
can encourage at the same time stronger integration and harmonisation, reduce
the degree of fragmentation and inefficiencies and allow for Member States to
jointly support trans-national collaboration in R&D by SMEs.

Considering the current Member States’
proposal to act through Eurostars-2 jointly in the area of R&D performing
SMEs, an EU intervention through an art 185 is a possibility to consider as it
could add value to the initiative of the Eurostars countries by joining efforts
in achieving societal and economic objectives.

The EU's right to act in this area is set
out in Article 185 TFEU[28].
Public-public partnerships are acknowledged to contribute to the realisation of
ERA, through their contribution in aligning and synchronising national
programmes.

In the Horizon 2020 Communication[29] it is i.a. stated
that:" Partnership approaches on the basis of
Articles 185 and 187 of the Treaty will also be continued".

The proposal for a Regulation establishing
Horizon 2020[30]
sets out in Article 20.2 (b) a number of criteria for how public-public
partnerships shall be identified. Eurostars-2 complies with those since it
provided (a) a clear definition of the objectives to be pursued in conformity
with the objectives of Horizon 2020 and broader Union policy objectives
indicated in chapter 2.2; (b) financial commitments of the participating
countries, (c) the added value of action at Union level as mentioned below and
(d) the critical mass, with regard to the size and the number of programmes
involved.

The Communication "A Reinforced
European Research Area Partnership for Excellence and Growth", adopted on
17 July 2012[31],
encourages the further use of these initiatives.

Eurostars has centralized management with
decentralized entry points, thus respecting the principle of subsidiarity.
While Member States are the 'founders' and the drivers of the programme, the
EU's role and contribution is key for the alignment and synchronisation of the
relevant national research and innovation programmes to continue and strengthen
the joint programme structure, featuring scientific, management and financial
integration.

3.2.        Lessons learned from the current Eurostars

Following the above reasoning, in 2008
several member Sates wishing to have a coherent approach at European level in
the field of R&D performing SMEs and to act effectively, took the
initiative within the framework of Eureka to set up a joint research and
development programme named ‘Eurostars’ for the benefit of R&D performing
SMEs, in order to obtain a critical mass in terms of management and financial
resources and the combination of additional expertise and resources available
in various countries across Europe. In order to increase the impact of Eurostars,
the EU decided to join the programme and this was accepted by the Eurostars
countries.

An interim evaluation has been conducted in
2010, two years after the start of the programme. This evaluation was carried
out by a Group of Independent Experts chaired by Ms Laperrouze, former Member
of the European Parliament and Vice-President of the ITRE Committee. The European
Commission communicated the results of the evaluation to the European
Parliament and the Council of the European Union in April 2011[32].

The interim evaluation concluded that:
"Eurostars is a good programme, which meets its objectives and adds value
to European R&D performing SMEs. For this reason the Group of Independent
Experts believes that Eurostars should not only be sustained but preferably its
budget should be increased in the future. However, in spite of good progress,
some scope for further improvement also remains". Twenty-four
recommendations, both operational and policy-oriented were proposed for
improving the programme both in a short-term and in a long-term (in case of a
follow up to Eurostars 1). The main recommendations, shared by the Commission
in its report and welcomed by the Competitiveness council conclusions of 31 May
2011, were mainly focussing i.a. on the respect of the Eurostars rules by all
participating countries, shorter time to contract, efficiency and transparency
of the evaluation process  and quicker progress towards more scientific,
management and financial integration, including a better synchronisation of
funding.

While those recommendations implying a
structural reform are to be addressed in the follow-up of Eurostars (see
chapter 5.3), a number of recommendations (more short-term) have already been
taken into account during the on-going programme, to the extent allowed by the
scale and scope of the current Eurostars as defined by the legislative
framework (they are also taken into account in the definition of the baseline
scenario in chapter 5.1).

Also thanks to these improvements, four
years after its launch, the Eurostars Programme has proven to be an attractive
Programme for R&D-performing SMEs and has also contributed to address the
problems mentioned in chapter 3.1, which were in fact at the origin of its
creation. This means that the model proposed by Eurostars brought the expected
benefits, but it is also clear that there is quite some room for improvements
(as already indicated by the interim evaluation) to increase its efficiency and
effectiveness.

The main achievements of Eurostars are the
following (more data in Annex 2).

·
Higher than expected number of applications
submitted and of projects funded

2600 applications were submitted during the 8
first Cut-offs and more than 70% of the 8635 Eurostars applicants were R&D
performing SMEs and SMEs. The number of applications has been increasing
consistently, from 215 applications submitted in 2008 to 728 in 2012. Since 2008,
613 projects were selected for funding. From 90 projects funded per year in
2008 and 2009, the Programme has grown to 135 projects funded in 2010, 145 in
2011 and 139 in 2012 (see Annex 2 – table 1). The average Eurostars project is
composed of three participants from two countries, and costs 1.4 M€.

·
SMEs are predominant in the consortium
composition

SMEs are representing around 70% of
participants and 80% of total project costs of projects funded. 41% of these
SMEs have less than 9 employees, and 42% have between 10 and 49 employees. In
one third of the funded projects, the consortia are exclusively composed of
SMEs. Collaboration with Universities and/or Research organisations is also
present in the portfolio, with a bit less than 30% of the consortia involving
one University or Research organisation with SME(s) and 15% of the consortia
involving more than one University and/or Research Organisation with SMEs (see
Annex 2- table 4).

·
Successful bottom-up approach

The Eurostars Programme is bottom-up and has
received applications in different technology fields, mainly in ICT 31%,
Biotech 28% and Industrial Technologies 14% (see Annex 2- table 3). A
progressive increase of the share of Biotech projects can be observed over the
years (20-25% in the first Cut-offs to 30-35% in the last Cut-offs) in parallel
to a steady decrease of ICT projects (30-40% in the first Cut-offs to 20-25% in
the last Cut-offs). Main market areas represented in the pool of funded
projects are Medical-Health Related 28% and Industrial Products-Manufacturing
20% and Computer related 8%. The share of market areas within the Eurostars
portfolio remains stable over the years. (see Annex 2 – table 3)

·
Integration of national programmes and decreasing
time to contract

Thanks to Eurostars, 12 national programmes
have been newly created to follow the Eurostars rule and 14 have been adapted
to this purpose. They have accepted the use of a central independent evaluation
and accepted to fund the projects according to a common ranking list issued by
this central evaluation. For this reason, it can be argued that the Eurostars
Programme has reached a good degree of integration in terms of management and scientific
integration: central submission and registration process, central evaluation
process with common criteria and a central selection decision.

The average time from the submission of the
project application to the communication of the evaluation results is currently
3.7 months. A decrease of the Time to Contract (for more than 14 months for the
projects submitted in the 3rd call (issued in 2009) to 9 months for
the 6th call (in 2011)[33]
(see Annex 2- table 2) has been obtained, but improvements have to be made in
terms of time to contract. Countries categorized as “Top 5 performers” can
reach a time to contract of less than 6 months but they represent only between
10% and 20% of the participants.

·
The “Eurostars model”

The model, which offers a centralized
management[34]
with decentralized entry points[35],
has optimized the coordination among the national programmes for R&D
performing SMEs while remaining close to final beneficiaries. The model is
based on one central submission point, a common set of eligibility rules, an
international and independent peer review, while the funding is based on a
binding ranking list and national earmarked budgets (see Annex 1). This allows
for transnational competition favouring excellence of the projects selected.

·
Higher than planned public funding

Eurostars has succeeded
in mobilizing an important amount of resources, both public and private, as
well as a substantive number of actors.  Twenty five countries participated in
the first Eurostars Cut-off, compared to thirty three countries as of today.
All Eurostars participating countries have been involved in at least one
project funded. (see Annex 2 – table 5)

To cope with increasing demand, Eurostars
participating countries made efforts to fund as many projects as possible. Six
countries increased their initial earmarked budget through an official decision
by their government ‘a priori’. In addition, 17 countries laid down additional
funds on top of their earmarked budget ‘ad hoc’ in occasion of the different
calls in the period 2008-2012 (12 of those countries did it systematically for
each call in that period). (see Annex 2- table 6)

Therefore, the current
Eurostars programme which was originally funded to a level of 400 M€, of which
300 M€ came from national funding bodies in the Eurostars participating
countries and 100 M€ from FP7, is reaching an overall public funding of 500M€,
of which 400M€ coming from the Eurostars countries. Those efforts made it
possible to maintain a reasonable success rate, which has remained above 20%
since the beginning of the Programme, giving an average success rate of 28%.

·
Indications of preliminary impacts

There are three key indicators for measuring
effect of the Eurostars programme on economic growth and job creation for the
participants:

o The
additional turnover that participants generate thanks to the projects they
participate in and the products they develop

o The
job creation that the Eurostars R&D activity helps to stimulate

o The
number of products that are developed thanks to Eurostars-funded projects

Participants of Eurostars projects coming
to an end are systematically requested to provide the Eurostars Final Reports.
The table below summarizes the information collected from 343 participants
until the end of 2012.

For each of the above mentioned indicators,
a distinction is made between what is achieved during the time the R&D part
of the product development is running (see the ‘Achieved impact’ column of the
table below) and what are the estimations based on the obtained results for the
three years after the Eurostars-funded R&D phase is completed (see
‘Expected impact’ column).

|| Number of participants who provided valid data || Achieved Impact during the life-time of the project || Expected Impact three years after the projects has finished || Impact ratio, achieved : expected

Additional turnover || 209 || € 52.69 M || € 497.56 M || 1 : 9

Job creation || 270 || 437 jobs || 1036 jobs || 3 : 7

Products developed\* || 209 || 117 products || 73 products || 3 : 2

\*Not all products were reported with their projected time to market, which is why 34 products are not counted as either “achieved” or “expected”.

Based on the first project impact reports
received, and when comparing the above outputs of the programme (achieved and
expected) with the public funds invested by the end of the programme (100M€
from the EU and 400M€ from the Eurostars countries), the programme appears to contribute
to considerable positive economic effects for the participating undertakings. With
1 M€ of public funds, 9.8 M€ of additional turnover is expected. 80% of
this effect is generated by a small proportion of the companies involved (12%).
When submitting an application, R&D performing SMEs expect on average to
double their annual turnover and to increase their number of employees by 60%.

For each Eurostars project around 3 products,
processes or services are expected to reach the market within 2 years.
Based on the first 65 projects completed, the participants declared to have
created 174 products, processes or services. This shows that Eurostars is also
a very good programme for knowledge transfer making possible translating
research and ideas into actual new products/processes/services.

The Eurostars programme has already started
to produce some interesting success cases in terms of Eurostars projects
with a good result and impacts, some of which are presented in Annex 3.

3.3.        Eurostars-2
in the context of research for SMEs and on the European Research Area

The
political support for actions in favour of R&D performing SMEs and also for
instruments contributing to ERA is growing:

The Europe 2020 Communication puts[36] forward three mutually reinforcing priorities: Smart growth
(developing an economy based on knowledge and innovation), Sustainable growth
(promoting a more resource efficient, greener and more competitive economy and
Inclusive growth (fostering a high-employment economy delivering social and
territorial cohesion). One of the five headline targets of Europe 2020 is that
3% of the EU's GDP should be invested in R&D, while "Innovation
Union" is one of the seven Flagship Initiatives. To improve the business environment
for SMEs is stressed several times in the Communication.

The Innovation Union Communication[37] further highlights the importance of SMEs in creating jobs and
economic growth. The Communication i.a. states that: "The Framework
Programme's contribution to nurturing fast growing SMEs must be boosted."
And furthermore that: "Too few of our innovative SMEs grow into large
companies."  It is also stated that: "Major progress has also been
made in developing partnerships to jointly implement research funding with
Member States and with industry[38]." The
Communication further states that the Commission will design future EU research and
innovation programmes to ensure simple access and stronger involvement
of SMEs, in particular those with a high growth potential. Further use should
be made of partnerships with Member State agencies, building in particular on
the experience of the Eureka Eurostars initiative.

In addition, a number of priorities of the
European Research Area (ERA) were set out in the 2012 Commission Communication
on the completion of ERA[39].
In particular, the Communication stresses the need for (1) More effective
national research systems, (2) Optimal transnational co-operation and
competition, (3) Optimal circulation, access to and transfer of scientific
knowledge. The Communication also includes Article 185 initiatives “which
combine EU, national and regional efforts into single European programmes”
amongst those Framework programmes and Commission’ initiatives that have
positively contributed in building ERA and that are considered an important
vehicle to obtain the above mentioned ERA objectives. The Commission will
therefore “pursue, stimulate and participate in Public-Public Partnerships […] to
address grand challenges and to leverage Member States' contributions and
ensure close coordination with relevant activities under Horizon 2020”.

This has led the Commission to include in
its Horizon 2020 proposal, within the chapter dedicated to support to SMEs
‘Innovation in SMEs’[40], also the support to a specific programme dedicated to R&D
performing SMEs, in their market-oriented transnational research activities,
clearly stating that this programme will be implemented by an Article 185 TFEU
initiative building on the Eurostars Joint Programme. This
programme, in combination with the activities under the ‘Leading and Enabling
Technology’ objective, will contribute to the goals of the Industrial
Leadership part to speed-up development of the technologies and innovations
that will underpin tomorrow’s businesses and help innovative European SMEs to
grow into world-leading companies.

Under Horizon, other schemes and actions
address SMEs.

For instance, the new SME instrument in
Horizon 2020 addresses innovative SMEs (not necessarily R&D performing
SMEs) displaying a high level of technology readiness and engaging in the last
phase of innovation activities. It will be used consistently across all
societal challenges as well as for the enabling and industrial technologies,
allowing SMEs to put forward their most innovative ideas for addressing
Union-level challenges. The new instrument will meet the needs of those SMEs
providing innovative solutions to specific challenges, irrespective of whether
these are high-tech and research-driven or social and service-driven
innovations.  It aims to fill the equity gap after the start-up and seed part
(up to 1 million €), which is largely covered by national and regional support,
and before innovative companies become attractive for venture financing (from 5
million €).

The new 'Access to risk finance' instrument
in Horizon 2020 will also have a strong SME focus, as called for by the
European Council. For the Debt facility, the SME focus will be strengthened by
working with financial intermediaries at national and regional levels. The
Equity facility will focus on early-stage investments, while having the
possibility to make expansion and growth-stage investments in conjunction with
the equity facility under the Programme for the Competitiveness of Enterprises
and SMEs. The Equity facility and the SME-related component of the Debt
facility will be implemented as part of two EU Financial Instruments that
provide equity and debt to support SMEs' R&I and growth, in conjunction
with the equity and debt facilities under the Programme for the Competitiveness
of Enterprises and SMEs (COSME). The 'Access to Risk Finance' specific
objective will support the SMEs in Part 3 of the SME Instrument to scale-up the
project results for commercial exploitation and economic impact.

R&D performing SMEs can continue to
participate to the more traditional collaborative projects under the H2020,
which will however follow the intervention logic of the societal challenges
and/or specific focus areas.

The
strategic positioning of these different instruments can be illustrated as
follows:

As showed in this graph, the strategic
positioning of the above mentioned measures/actions in terms of to the support
they provide in different phases of the developments of the SMEs
research/business idea with relation to the market, is different and
complementary.

These differences and complementarities can
be defined along many other dimensions, as summarized in the table below:

DIMENSIONS || Collaborative R&D || Eurostars || SME instrument || Financial instruments for SMEs

- SME/projects supported || || || ||

Eligibility || All R&D actors (no specific to SMEs) Larger consortia || SPECIFIC TO R&D performing SMEs (mostly spin-offs, start-ups and young companies)[41] Small consortia || All innovative SMEs (not necessarily R&D performing) usually well established Single company support possible || Innovative SMEs (including R&D performing SMEs)

Approach || Top down || Bottom-up || Embedded in challenges || Bottom-up

Technology Readiness Level of the project || Low to medium || Medium || High || Medium to very high

Strategic positioning of the programme || Fully R&D driven projects || Mainly R&D driven project || Market opportunity driven projects || Commercial

- Modalities to support || || || ||

|| || || ||

Type/amount of support provided || Grants || Mainly grant Around 1M€ per project || Grants 1 to 5 M€ || loans/risk capital Higher amount (up to 7,5M€ loans)

Level || EU || National/EU || EU || National

Integration || || Integration/ harmonisation /alignment of national research funding programmes || ||

Eurostars-2 will aim at supporting research
performing SMEs by co-financing their market oriented research projects in any
field. As the table shows, each instrument has ideally its own specific target
given by a combination of the type of SMEs/project targeted (eligibility
conditions, technology readiness level, openness of the topics) and the
modalities of implementation (type of support, source of support).

Eurostars is thus different from the other
initiatives providing SME support and at the same time it is complementary to
them. In addition, while all these instruments are responding to particular
needs of a certain type of SMEs, however none of them combine a specific focus
to transnational R&D performing SMEs with the integration and harmonisation
of national programmes (see last row of the table) as Eurostars does through
the use of Article 185.

4.           Objectives

4.1.        General objective

Chapter 3 above has i.a. identified
two major problems: (1) Insufficient European
investment in R&D, in particular by R&D performing transnational SMEs,
and, (2) Fragmentation of
Member States' R&D programmes aimed at R&D performing SMEs. In order to tackle these problems, while taking into consideration
the other R&D support programmes for SMEs and the lessons learned from the
current Eurostars, the following general objective for Eurostars-2 has been
set:

GO. Stimulate
economic growth and job creation by enhancing the competitiveness of R&D
performing SMEs through transnational R&D collaboration.

4.2.        Specific objectives

In order to achieve the general objective
above, two specific objectives have been set.

SO1. Promote transnational market-oriented research
activities for R&D performing SMEs in any field, leading to the
introduction of new or improved products, processes or services in the market
by the participating SMEs.

SO2.
Contribute to the completion of the ERA and increasing the accessibility,
efficiency and efficacy of public funding for R&D performing SMEs in Europe by aligning, harmonising and synchronising the national funding mechanisms.

4.3.        Operational objectives

To reach the
specific objectives above, the following operational objectives have been
identified.

OO1. Three years after the end of each project, for
each 1 M€ of public funding (from EU and participating
Eurostars countries), on average, the turnover of the participants should
increase by at least 10 M€, at least 25 new jobs should be created and three
new or improved products, processes or services should be on the market.

OO2. Scientific
integration[42]
of national programmes: Ensure excellence and impact of the projects selected
through international (EUREKA wide) competition and the application of a single
evaluation and selection process.

OO3. Management
integration of national programmes: Further improve operational excellence and
accountability for the programme by reducing the time to contract while
maintaining an optimal frequency of calls per year.

OO4. Financial
integration of national programmes: Harmonisation of national funding rules and
application of a binding ranking list.

OO5. Facilitate
the participation of R&D performing SMEs without previous experience in
transnational R&D activities.

The relation between problems, general
objective, specific objectives and operational objectives for Eurostars-2 can
be summarized as follows:

5.           Policy
options

Eurostars is a joint programme of Member
States organised under the umbrella of the EUREKA initiative. Therefore the
Commission's choice of the options has been limited to those options that the
discussions and consultations with Member States and other stakeholders found
to be realistic. The following three options came out of these consultations.
Other options have not been further analysed or ranked, as they did not get
sufficient support from the Member States.

5.1.        Options

              Option
1 – The business as usual (BAU) option (Baseline)

This option is the continuation of the
existing Eurostars Joint Programme during the next programming period
(2014-2020) in its current format, implementation modalities and overall
budget. The EU participation and financial contribution would be the same as
for Eurostars 1 (the EU financial contribution is up to 100 M€ under FP7). This
option is set as baseline.

12 out of the 20 Operational
Recommendations from the interim evaluation have been fully implemented in
Eurostars 1 by the end of 2012 (mostly linked to the efficiency and
transparency of the central evaluation, selection of industry experts, feedback
to participants, etc). The above mentioned actions have led already to the
positive achievements mentioned in the IA report: shorter time to contract, higher
transparency of the process and higher quality in the evaluation process.
However, there is still scope for improvements.

              Option
2 – The zero option (no EU intervention in Eurostars-2)

Under this option EUREKA Member States
would have to continue the programme on their own and the EU would not join the
initiative. The EU participation and financial contribution to Eurostars will
be stopped after the end of its current funding phase (by the end of 2013).
Member States will be left to decide whether to continue Eurostars and to what
extent to pursue the scientific, managerial and financial integration.

              Option 3 – The Reinforced partnership option

The reinforced partnership option means
that the existing Eurostars would be continued in the next programming period
as an Art.185 initiative in an improved format based on the full implementation
of the recommendations made in the interim evaluation report, an enhanced
degree of integration and with an extended scope and scale.

Strongly encouraged by the Commission
services, EUREKA Member States have set up a Eurostars-2 Steering Committee and
five working groups which are looking at improvement measures in each of the
programme stages (Promotion, Eligibility, Evaluation, Funding and
Monitoring/Impact) to address the recommendations of the interim evaluation
(including the integration of the programmes) and overall to improve
performance on the basis of the experience until now. These improvements to be
implemented in Eurostars-2 aim at obtaining shorter time to contract, more
standardization of rules and processes, lean-administration and higher
synchronisation and integration. These groups have elaborated draft guidelines for
Eurostars-2 which will be formally adopted by the EUREKA relevant governing
board in 2013, ready to be implemented under the new programme.

This reinforced partnership (improved
effectiveness and efficiency of Eurostars-2 management and governance for the
ultimate benefit of SMEs) will be achieved by a number concrete measures
pushing the Eurostars participating countries to:

·
respect a common set of eligibility criteria;

·
standardize the financial viability check[43];

·
improve the common set of evaluation criteria
(which shall better reflect the market orientation[44] and be more aligned to those of
Horizon 2020);

·
avoid double reporting at national and European
level for participants;[45]

·
ensure the necessary funding to cover for at
least all the projects positioned in the 50 first places of the common ranking
list, by increasing substantially the financial contribution of each
participating countries;

·
ensure a Time to Contract per project of less
than 7 months.

This
will be strongly pursued by introducing national milestones and back-up action
plans into the Bilateral Agreements between Eurostars participating countries
and the EUREKA Secretariat focusing on constant improvements in the underlying
national programmes in order to further synchronise and reach a shorter
time-to-contract[46].

As mentioned under the BAU option, 12 out
of the 20 Operational Recommendations from the interim evaluation have been
fully implemented in Eurostars 1 by the end of 2012. The remaining eight
Operational recommendations (plus four Policy recommendations) involve more
‘structural’ long-term changes. This would not be implemented in short term
under Eurostars 1, but can only be fully implemented in the Reinforced
partnership option.

These recommendations have therefore been
taken into consideration when formulating the operational objectives for Eurostars-2
(see chapter 4 above). They refer to:

·
the objective of simplifying and harmonising the
procedures through the introduction of concrete milestones in the bilateral
agreements between the Eureka Secretariat and the national Funding Bodies (to
be restructured and renegotiated) (recommendation 16 –operational objectives
OO3-OO5);

·
the respect of eligibility criteria (including
standard financial viability checks) recommendation 17, operational objectives
OO3-OO5);

·
the better synchronisation allowing for a
virtual common pot operating as a real common pot (meaning no holes in the
ranking list) and excellent projects funded (recommendation 22, operational
objective OO3-OO5)

Other recommendations, such as the role of
the Commission in furthering objectives of harmonisation and synchronisation
are also addressed in the reinforced partnership option. Compared to the BAU
option, the reinforced partnership option entails that the Commission will be
consulted on the milestones in the bilateral agreements and will approve the
annual Eurostars-2 work plan of the ESE.

The
ESE, in agreement and collaboration with the Eurostars countries, will also
make sure to:

·
maintain a single entry point for proposals’
submission and central and common open calls for proposals with a minimum of
two cut-off dates per year, with clear and accessible information on common and
national rules to the applicants;

·
maintain a central evaluation of proposals, making
it faster and fully transparent and including the selection of technical
experts/evaluators with a sound market orientation and financial background;

·
address, through targeted campaigns, R&D
performing SMEs which have never before been involved in transnational publicly
funded R&D projects and substantially increase their participation in the
programme;

·
harmonize the feedback to applicants across
countries within an agreed deadline[47].

In order to enlarge the programme and to support
a higher number of R&D intensive SMEs with growth potential according to
SO1, Member States envisage increasing substantially the financial volume of
the programme. Consequently and in order to incentivise and support further the
above mentioned improvements the EU  financial contribution should be raised
accordingly.

Furthermore the international reach of the
programme shall be increased by associating third countries (without the right
to access to EU funding).

5.2.        Discarded option: EU financial support only via ERA-NET

This option would require an ERA-NET to
coordinate the research programmes of the Member States. EU funds would be used
to support networking activities, including joint activities. However, this
would not have the same level of stability, dedicated implementation structure
and integration as reached by Eurostars 1 through the use of Art 185. It will
also be much worse in terms of visibility of the initiative dedicated to SMEs. Therefore
this option is discarded as it would represent a step backwards compared to the
results obtained until now and would therefore not offer a valid alternative to
the actual running of a jointly executed programme.

6.           Analysing
the Impacts

6.1.        Impact on administrative burden and simplification
potential

The current Eurostars programme has
demonstrated that initiatives based on art. 185 are suitable vehicles to align,
synchronise and harmonise national programmes. Best practices exchange and
mutual learning lead to improved, simplified administrative procedures and in
turn decreased administrative burden for the participating SMEs. As example,
during the implementation of Eurostars 1 it turned out that time-to-contract in
the various participating national programmes differs considerably, between a
few weeks to more than 14 months. The peer pressure through Eurostars and the collective
will to decrease administrative burden for SMEs have led to the creation of a
working group to exchange best practices and the suggestion to introduce
national milestones and action plans into the Bilateral Agreements between
Eurostars participating countries and the EUREKA Secretariat for Eurostars-2 in
order to reach a shorter time-to-contract.

In principle, all three options contain
such simplification potentials. However, alignment and harmonisation, and
changes in administrative procedures in general, come with an initial cost.
National programmes need to analyse their systems and change them where
necessary. Existing rules, regulations and guidelines need to be changed.
Whereas the benefit for SMEs is immediately obvious, the benefit for the administrations
is not always immediate but only gradually over time. The likelihood and
intensity of change increase with the increase of perceived incentives. In that
sense it can be estimated that the decrease in administrative burden and the
implementation probability of simplification to the benefit of SMEs increases
from Zero Option (Option 2) to BAU option (Option 1) and is the largest in
Reinforced partnership option (Option 3): the EU participation, subject to a
number of conditions, is an important lever.

Option 3 provides a strong incentive to the member States and
leverage to the Commission to foster integration of national research
programmes (in line with ERA), which is an impact that the other instruments do
not have. The integration and alignment of national programmes, as well
as standardisation of certain procedures is necessary, since national
programmes still strongly differ in certain aspects which a key for the
performance of the Eurostars programme and for the overall ERA objectives. For
example:

·
national procedures to provide funding to SMEs
are still very complicated in certain Member States and very long (Time to
contract in Eurostars differs greatly country to country-  from a few weeks to
more than 14 months);

·
financial viability checks are very different;

·
reporting is still asked also at national level,
while should be centralised;

·
funding rules are still quite different  in
terms of eligibility of costs,  eligibility of partners and funding rates

While a full standardisation would be against the spirit itself of
art 185, an alignment of these practices, based on mutual learning and exchange
of good practice, would be very positive. Already Eurostars countries have
‘delegated’ to a central structure the evaluation and accepted to respect the
ranking list issued by the independent evaluators.

However, still there is a strong potential to improvements and the
role of the Commission is key in avoiding national ‘influences’ against an
effective integration. This control is exercised through the participation to
the governance bodies, to key working groups and through the regular monitoring
(annual report, etc).

To quantify the expected administrative
cost reductions for beneficiaries and authorities of the Reinforced partnership
option is not easy. One needs to recall the Eurostars model: centralized
evaluation, decentralized implementation through local administrations.

Eurostars-2, Reinforced partnership option,
foresees to have:

·
a common Financial Viability Methodology;

·
a common Reporting system;

·
a balanced Funding which would notably allow to
guarantee funding for at least the top 50;

·
a funding Tool Box.

Once the common Financial Viability
Methodology is in place, member states will be released from their national
administrative task which will be performed centrally by ESE. One can assume
that the administrative burden to check the financial viability centrally by
one body rather than through 33 Members States will reduce the overall
administrative burden.

The common Reporting System foresees only
one report and not two as today (one done by ESE and one by the NFB), so the
benefit would be very clear for the NFBs with no administrative burden anymore.
The task being done centrally by the ESE, this would put more pressure on ESE
but, overall, the decrease would be significant. It will entail a cost
reduction for the SMEs that would only have to do one report instead of two. So
the administrative burden would be clearly decreased.

The balanced Funding and funding Tool Box
will allow having more efficient funding process thanks to the peer pressure
and implementation of best practice.

In conclusion, the expected administrative
cost reductions for beneficiaries and authorities of the Reinforced partnership
option are assumed to be substantial. However, at this stage, no qualitative
quantification exists.

6.2.        Critical
mass

The EU
Framework Programmes have proven very successful in creating research
relationships involving SMEs across Europe and in promoting a
cross-fertilisation of ideas. However, the programmes are constantly largely
oversubscribed and not sufficient in size to satisfy the existing demand and to
generate the necessary impacts due to a lack of similar activities and/or a
lack of synchronisation at Member State level.

The current Eurostars programme, through
its bottom-up approach and the ‘Eurostars’ model proposed, has demonstrated
that it responds well to the needs of a certain type of SMEs by covering an
empty niche in the panorama of existing SME support schemes (as shown by the
increasing number of SMEs applying to the programme). Due to its specificity,
Eurostars has therefore demonstrated that it can work towards creating the
necessary critical mass of SMEs investing and performing R&D, by
encompassing the full scope of knowledge intensive technologies required to
accelerate the development and introduction of major technological advances.
This has been achieved by mobilizing 34 countries, which are actively participating
to Eurostars 1.

Between 2 and 6% of the 20.7 million SMEs
in Europe constitute the potential target group[48] for Eurostars (i.e. R&D
intensive SMEs with capacity for transnational cooperation, amounting to
roughly 400.000 SMEs as a lower target). By the end of 2012 about 6.000 SMEs
have applied for support to Eurostars 1, i.e. about 1,5% of the potential
target group has been reached. Therefore a sufficiently large demand can be
assumed. In average 37% of the submitted projects were above threshold and
therefore fundable. Although the number of applications has constantly
increased over time, the percentage of projects meeting the quality targets
remained the same. Taking into account this existing demand from the target
group and the observed constant increase in applications, it can be predicted that
about 26.000 SMEs would apply for Eurostars-2.

With a constant quality threshold of 37%
about 9.600 SMEs would become fundable and the necessary public funding in
order to support these projects would amount to more than 2.2 billion € for the
period 2014-2020.

Therefore there is a clear need for
increasing the available public funds including a sufficiently strong
intervention by the EU. The image below visualises the predicted increases.

Although the continuation of the current
programme (option 1 BAU) would maintain its impact in terms of critical mass,
its current scope and scale does not seem sufficient any more. EUREKA Member
States have already started to increase their financial contributions under the
current programme, but incentives for national programmes with respect to
further efficiency and effectiveness gains have been absent due to the
impossibility of the European Union to match those additional funds. This has
also led the Eurostars countries to reduce the promotion campaigns for Eurostars,
which can also explain the steady number of applications in 2012.

With respect to the "Zero
Option" (Option 2), the argument is that it will allow to a lesser
extent gathering the critical mass, but more importantly the EU would not have
the lever to sufficiently contribute to increase efficiency and effectiveness, not
addressing the administrative burden for SMEs as outlined above.

It is argued that the Reinforced
partnership (Option 3) will contribute considerably more than the BAU
option to obtain the critical mass necessary for the programme to show the
intended impacts. It would also allow more encouraging success rates for
potential beneficiaries.

6.3.        Leverage effect

              Option
1 - BAU Option

If EUREKA participating countries would
provide the same annual budget for the period 2014-2020 as for 2008-2013,
around 300 M€ national funds would be pooled, giving a total budget of public
funding of 400 M€ for the seven-year period 2014-2020. The part from the EU
would amount to 25% of the total public funds, as in the original Eurostars 1
budget.

In Eurostars 1, for 1 M€ of public funds,
1.22 M€ of private funds have been injected into the projects. The private
funding in Eurostars-2 – given the same relationship between public and private
funding as in Eurostars 1 - would then be some 488 M€. Total funding (public
plus private) would amount to 888 M€. Based on the current information
available for Eurostars 1[49],
it is assumed that the turnover in the funded Eurostars participants would
increase with some € 4 billion and some 10,000 new jobs would be created (three
years after the end of each project). Furthermore, under the BAU option, some
1,560[50]
new products or improved products, processes or services would be on the market
(three years after the end of each project).

These data are used as a reference by
keeping well in mind that this is a rough approximation due to the lack of
linear relation between level of funding and results/impact of the project.

              Option
2 - The Zero option

With this option, as there would be no EU
budget contribution to the programme, the overall public budget would very
probably be lower than in the BAU option, or in the worst case reduced to zero.
This has been clearly observed[51]
in EUREKA activities which are organised without EU funding, where not only project
numbers but more importantly the national financial investments have been in
decline over years. In addition, and even more important, effect on alignment
and synchronisation of programmes, which finally represent a simplification to
SMEs intending to operate within the internal market and beyond, have been very
limited or absent.

The impact on overall R&D investments
would be lower than in the BAU option. Consequently, the potential impact in
terms of economic growth, jobs and competitiveness would be modest, or possibly,
non-existent.

              Option
3 – The Reinforced Partnership option

As of mid-January 2013, EUREKA Member
States amount their budget provisions for the period 2014-2020 to 861 M€. The
Commission is proposing to maintain the current intensity of EU contribution of
25% of the overall public funding. Therefore, the EU contribution will amount
to 287M€[52],
leading to a total public funding for Eurostars-2 for 2014-2020 of just under 1.2
billion €.

While acknowledging that linear
extrapolations are not suitable and that in the line of financial crisis the
leverage is difficult to anticipate, we can still base our analysis on some
indicative data. Based on the same ratio between public funds (participating
countries and EU) and private funds as in Eurostars 1 (€ 1 public funds gives €
1.22 private funds), the overall public funding invested in Eurostars projects
would leverage private funding of some 1.4 billion €. Total funding (public and
private) would be around 2.5 billion €.

The impacts of the Reinforced Partnership
option, as compared to the BAU option, would be higher in two aspects:

·
Impacts in terms of increased investment in
R&D as well as in number of new jobs and growth created in the
participating SMEs.

·
Impacts in terms of pooling of Eurostars
participating countries’ funds, ‘scientific, financial and management integration’
and synchronisation of national funding and thus contribution towards ERA.

For indicative purposed, by applying the
same funding-impact linear relation currently experienced by Eurostars 1, the
turnover in the participating SMEs is expected to increase with some € 12
billion and around 30,000 new jobs will be created (10 M€ of increased turnover
and 25 new jobs for each 1 M€ of public funding, three years after the end of
each project). For both turnover and jobs, that is almost three times higher
than under the BAU option. Furthermore, some 4,500 new or improved products,
processes or services will be on the market (three years after the end of each
project).

6.4.        Innovation Impact

SMEs are key
drivers of innovation [53] serving as an
important conduit for knowledge spill-overs[54].
The last twenty years have shown that entire sectors have been renewed and new
industries created driven by innovative SMEs. SMEs have brought new ideas and
developments to the market making them an economic success while at the same
time responding to societal and environmental challenges.

It has been
shown that SMEs involved in transnational R&D projects benefit more from
that cooperation than big companies in terms of exploitation, growth and jobs
created[55].
The impact study on participation of SMEs in FP5 and FP6[56] confirms that transnational
R&D projects had a positive impact on the R&D and technological
capabilities of the small firms. Such funding increases their capacity to
generate, absorb and use new knowledge and it promotes their
internationalisation. However, the impact studies also highlights that the
Framework Programmes lacked a dedicated strategy fostering SME participation
and fully mobilizing the SME potential in research, development and innovation.

Eurostars had
been initiated in order to provide such support to R&D intensive SMEs in a
dedicated manner and at the same time overcoming some of the observed
fragmentation of the existing national SME support schemes.

In this sense all
three options contribute to innovation impact. A larger dedicated
programme as described in the Reinforced Partnership Option 3 will necessarily
lead to a higher number of innovations in a shorter time and, therefore, have a
higher economic impact, in particular with respect to the competiveness of
European SMEs.

6.5.        Economic Impact

Based on their overall importance in the
economy, their role in job creation and growth production, SMEs contribute
considerably to the economic growth of Europe[57].

Of particular importance are the R&D
intensive SMEs due to their high innovation potential and the gap between
economic performance in the EU and other regions of the world is often
explained by the respective lack and/or lacking growth of such firms[58].

Programmes strengthening the innovation
capacities of such SMEs and incentivising their innovation level will therefore
have an effect on the whole European economy. They also contribute to the
generation of new jobs through the better performance of the industry with more
successful products and resulting higher demand. Coordination and streamlining
of such programmes throughout Europe will have an even more pronounced effect.
The integration and harmonisation of national programmes therefore plays again
a critical role in ensuring higher impacts.

Within this line of argumentation, the
implementation of Eurostars through the reinforced partnership option (Option
3) will generate substantial benefits for the European economy such as
strengthening the European industry in the global competition, creation of new
jobs and contribution to the increase of the European GDP. In particular, technologies
developed in the framework of Eurostars will contribute to help the European
industry to maintain its competitiveness.

As pointed out under the BAU option, the
number of applications has been increasing steadily over the period 2008-2012.
As a result, the success rate (i.e. funded vs. submitted) has been going
down from 42% in 2008 to 19% in 2011. Given the current and projected number of
applications, the BAU option would imply that the success rate would continue
to fall. This would probably lead to reduced attractiveness of the programme
after some time, because some SMEs would not even find it worthwhile to apply,
and the number of applications would start to go down with probable loss of
excellent projects, and related decreased impact on growth. The reinforced
partnership option could reverse the falling success rate and keep or even
increase the attractiveness of the programme for the best.

6.6.        Social Impact

Social impacts mainly relate to employment
and labour markets, in terms of creation of high-skill jobs, as well as to
making the public administration more efficient, in particular decreasing
administrative burden for SMEs. In addition, the knowledge and innovative
solutions that result from Eurostars projects (see for instance the success
stories in Annex 3) are clearly contributing to increase the socioeconomic
welfare.

6.7.        Sensitivity analysis

The contribution of Eurostars to economic
growth and job creation (cf. the General Objective of Eurostars) depends on,
besides the management and the scientific integration, i.a. on the
funding contributions from the participating Eurostars countries, the EU and
the private funding from the participants.

The relationship between the public funding
and the economic impacts in terms of increased turnover, new jobs and new or
improved products, processes or services described above under the BAU option
and the Reinforced Partnership option, is estimated on the basis of the
experiences from Eurostars 1. Reduced funding would lead to reduced turnover,
jobs, etc.

The relationship between public funding and private funding (1.22)
is also based on the experience from Eurostars 1. In the current economic
climate, SMEs will likely reduce their R&D investments. For the
calculations of increased turnover, new jobs and new or improved products,
processes or services on the market, this figure is probably the most critical.
If for example the relationship goes down from 1.22 to 1, the total funding
under the Reinforced Partnership option would be reduced by around 250 M€
compared to a relationship of 1.22. Given that each project on average costs
around 1.5 M€, it means that an amount equivalent to some 166 projects would
not be available.

7.           Comparing
the Options

7.1.        Comparison of the options

The following table presents the assessment
of the different policy options compared to the option Business as Usual (taken
as Baseline). This option is chosen as reference because it presents the
current situation and has proven to be efficient means for supporting
transnational R&D collaboration by R&D performing SMEs.

- || = || +

Disadvantage compared to reference || Same impact as reference || Benefit compared to reference

Option Criteria || Business as Usual (Option 1) Baseline || Zero Option (Option 2) || Reinforced Partnership (Option 3) ||

Effectiveness || || || ||

Critical mass || = || -/= || + ||

Impact on SMEs || = || -/= || + ||

Leverage effect || = || -/= || + ||

Innovation impact || = || -/= || + ||

Economic impact || = || -/= || + ||

Social impact || = || =/- || + ||

Lesser administrative burden for SMEs || = || -/= || + ||

Best practice and mutual learning of national programmes || = || =/- || + ||

7.2.        Comparison of the options in terms of effectiveness, efficiency
and coherence

Effectiveness is defined as the extent to which
options achieve the objectives proposed. Table 1 clearly indicates that, while
the BAU option could be a viable alternative, the Reinforced partnership
option (option 3) meets the set objectives best.

Efficiency is defined as the extent to
which objectives can be achieved for a given level of resources/at least cost
(cost-effectiveness). The economies of scales created by the use of the same
experienced implementation structure to implement a similar programme with
higher budget will also lead to more efficient procedures and reduced
administrative burden. For instance, given a constant demand (i.e. target group
– see chapter 6.2), evaluation and management costs remain roughly identical
while under the Reinforced partnership option more SMEs will benefit
from the support (higher success rate).

Coherence is defined as the extent to which
options are coherent with the overarching objectives of EU policy. While both
the BAU and the Reinforced partnership option are coherent with
the general objectives of EU2020, the Innovation Union flagship initiative and
the accomplishment of the ERA, the reinforced option, by improving the overall
implementation of the programme (integration of national programmes, quicker
and more transparent procedures and most importantly  involvement of SMEs new
to transnational R&D collaboration that will reinforce their
competitiveness), will ensure the achievement of those general objectives to a
higher extent: the degree of coherence is considered higher.

The table below assesses the options in terms of effectiveness,
efficiency and coherence:

Options || Option 1 - BAU || Option 2 No EU intervention in Eurostars || Option 3 Reinforced partnership option

Effectiveness || Only few countries had specific support programmes for R&D intensive SMEs, but created them in order to form Eurostars. There is a positive effect on the long-term sustainability of public finances related to closing Europe's innovation gap. || Same as option 1 with a considerable risk that achieved effects will decrease over time. || Expected greater effect compared to Option 1: success of Eurostars 1 encourages further determination of Member States (including the less performing ones) and peer pressure.

There is effective exploitation of results and job creation as the programme is close to the market. || Identical to smaller effect compared to Option 1. || Greater effect compared to Option 1

Efficiency || National programmes work towards harmonisation and synchronisation. Introduction of best practices and mutual learning. || Same as option 1 with a considerable risk that achieved effects will decrease over time. || More efficient compared to Option 1 due to improvements in the implementation.

Assuming constant demand (i.e. overheads), the number of projects funded would remain the same as in Eurostars 1. || Assuming constant demand (i.e. overheads) the number of projects funded would probably shrink considerably over time due to reducing the efficiency of the programme. || Assuming constant demand (i.e. overheads), more projects will be funded, therefore more innovations in SMEs can be supported. Excellence is increased as rank lists of projects can be better served and high-ranking proposals are not dropped due to lack in national support or due to shortcomings in interoperability.

Coherence || Synergies with the current policies would be guaranteed through to the link to EU2020 and Horizon 2020. || The absence of the EU in the programme would render policy coherence less obvious. || Identical to Option 1.

7.3.        Preferred option

Based on the assessment, Option 3
(Reinforced Partnership) provides the best means to achieve the defined
objectives. In addition, it generates very good synergy with other SME related
activities under Horizon 2020 and can be built up upon achievements and
experience already gained in Eurostars 1.

Option 3 allows a higher level of
integration and harmonisation of national programmes with a clear added benefit
decreasing administrative burdens for SMEs due to sharing of best practices and
mutual learning, all this becoming explicit aspects that are embedded in the
programme.

It helps to overcome the so-called
"market failures" SMEs face when intending to innovate and entering
into or developing new markets.

It fosters to move the pre-competitive
research closer to market by accelerating market introduction of new
technologies keeping Europe competitive. Furthermore, the current economic and
financial situation makes investment in technology even more necessary for
growth and competitiveness.

This option is also preferred according to
the results of the stakeholder consultations as described in chapter 2.2.

Therefore it is recommended to implement
this option as the most adapted to achieve the defined objectives in Chapters 4
and 0.

              Scope

Eurostars-2, developed according to the reinforced
partnership option, will support excellent innovation in R&D intensive SMEs
in an enlarged and improved manner and, thereby, addressing the most promising
technologies capable of improving the EU industry competitiveness.

It will build on the successful features of
Eurostars 1 such as a single central evaluation used by a large number of
national support programmes allowing for more competition to identify the best
transnational R&D projects. But Eurostars-2 will be reinforced by improved
features based on the lessons learned leading to a stronger integration,
harmonisation and synchronisation of national programmes beneficial to SMEs in
general as well as European innovation landscape as a whole. By that token, it
would also facilitate the participation of newcomers and in particular SMEs
without previous experience in collaborative R&D.

              Structure

Whereas the overall governance structure of
Eurostars has proven sufficiently efficient and effective under Eurostars 1 and
is deemed also sufficient for the reinforced option including an increased EU
financial participation, important improvements will be introduced, for
instance a common financial viability verification for SMEs and an improved
redress procedure to increase the transparency of the evaluation system. In
addition, new implementation of targets and milestones will be incorporated in
the programme.

              Budget

The current estimation is that EUREKA
Member States' contribution to Eurostars-2 would amount to 861 M€. The driving
force behind this financial commitment to innovation and SMEs, in particular in
the current period of scarce public funds and reduction in various Member
States of R&D spending, is not surprisingly triggered by the expectation of
a similarly ambitious intervention by the EU, in the order of 287 M€.

8.           Monitoring
and evaluation

8.1.        Monitoring

Three
different kinds of measurement will be maintained during the programme:

·
evaluation on whether the programme produces the
required results in terms of the benefit and the competitive position of the
participating SMEs;

·
continuously checking that public money invested
is well spent by following the objectives on scientific, management and
financial integration;

·
monitoring that the evaluation and selection
process is transparent and fair.

The evaluation of the progress against the
criteria above will be executed at technical, managerial and financial levels
using a limited set of headline indicators (see table below).

The managerial monitoring is executed by
the governing bodies of Eurostars. A clear management and communication
structure ensures the appropriate day-to-day management of the project and
helps in the strategic planning process.

The main governing body of Eurostars is the
High-level Group consisting of the High-level Representatives of each EUREKA
Member State participating in Eurostars. The Commission as representative of
the EU currently has an observer status, which will become an enhanced observer
status with the right to approve the annual Work Programme. This status
complies with the Secretariat-General Guidelines (Commission guidelines on
participation on private-law bodies).

One key element is to ensure that a fair
and transparent evaluation and selection process is in place. A
well-established selection process can attract R&D performing SMEs new to
transnational R&D activities.

Ex-post audits to the beneficiaries and the
National funding Bodies of the participating EUREKA Member States are conducted
by the Dedicated Implementation Structure according to the common rules.

Operational objectives || Indicator || TARGET by the end of the programme

Indicators on implementation at programme level

Leverage on public funding || Overall national public funding committed and effectively spent by participating Eurostars countries on Eurostars projects || Eurostars countries should contribute with at least 75% of the total public funding

Leverage on private funding || Amount of private co-funding in the projects Number of R&D performing SMEs funded through the Eurostars programme || 4.2 M€ private investment for 1 M€ EU contribution > 4,000 R&D performing SMEs

Indicators linked to the operational objectives

OO1. Scientific integration

|| Number of countries to comply with the single set of eligibility criteria || 100% of participating Eurostars countries

|| Number of Member States to accept a common financial viability check || 100% of participating Eurostars countries

|| Number of Member States to accept one common project reporting (the financial reporting needs to remain at national level) || 100% of participating Eurostars countries

OO2. Management integration

|| Number of Eurostars countries with same funding rates for participating SMEs  || 75% of participating Eurostars countries

|| Number of Member States to accept that eligible costs are based on a common definition of R&D (e.g such as the one given in the OECD‟s Frascati Manual) || 100% of participating Eurostars countries

|| Overall average time to contract (TTC) || TTC in line with Financial Regulation

OO3. Financial integration

|| Number of participating Eurostars countries to guarantee funding for their participants in the Top 50 projects || 100% of participating Eurostars countries

|| Number of participating Eurostars countries to accept and reach progressive integration with milestones set in the Bilateral agreements || 100% of participating Eurostars countries

|| Number of participating Eurostars countries to accept that eligible costs are based on a common definition of R&D || 100% of participating Eurostars countries

OO4. Facilitate participation of new SMEs

|| Number of SMEs which have previously not participated in transnational collaborative research projects || >50% of the R&D performing SMEs

8.2.        Impact monitoring

The impact of Eurostars as a programme is
to be measured i.a. through the increase of total turnover for participating
organisations [59]
three years after the end of the programme. The target is to obtain with 1 M€
of public funds, 9.8 M€ of additional turnover. With 520 M€ of public funds in Eurostars
1, the total increase in turnover for participating organisations is estimated
at 5.1 billion €. The impact target for Eurostars-2 is forecasted at 12 billion
€.

Further output indicators concern
job creation, market introduction of new products, processes and services as
well knowledge production (measured by patent applications). Since they mainly are
referring to impact after the end of the Eurostars projects (usually
three years after), these indicators will be collected systematically from the
outset.

|| Indicators || TARGET by the end of the programme

Turnover increase || Additional turnover in Eurostars participants generated thanks to the project || 10 M€ per 1 M€ public funding

Jobs created || Number of additional employees hired as a consequence of the activities generated by the Eurostars project || 25 new jobs per 1 M€ public funding

Products/process/services || Number of new or improved products, processes and/or services generated by the Eurostars project and introduced in the market after three years by the end of the project || 3 per project

Increase of knowledge base for R&D intensive SMEs || Patent applications and patents || 3 patent applications per 10 M€ public funding

The table below summarizes rough
estimations of the possible achievements with respect to the three options:

|| BAU || ZERO || Reinforced option

1M€ public funding leads to 10M€ additional turnover and 25 extra jobs by the end of each project || 4 b€ 10,000 || < 4 b€ < 10,000 || 12 b€ 30,125 jobs

3 product/ processes/ services per project three years after the end of the project || 1,560 || < 1,560 || 4,700

3 patent applications per 10 M€ public funding || 150 || < 150 || 360

8.3.        Evaluation

An interim evaluation of the Eurostars-2
Joint Programme will be carried out by independent experts three years after
the start of the Programme. This means that an assessment of Eurostars-2 will
take place in 2017. The evaluation will cover the relevant criteria identified
in the proposal for Horizon 2020 for assessing potential initiatives under
Article 185 as well as the quality and efficiency of the implementation of the
Programme, including scientific, management and financial integration. The
evaluation shall also give recommendations i.a. on the most appropriate
ways to further enhance integration. The Commission shall communicate the
conclusions of the evaluation, accompanied by its own observations, to the
European Parliament and the Council.  If appropriate, the Commission can also
put forward proposals for amendments of the EU participation in the Eurostars-2
Programme.

An independent ex-post evaluation will be
carried out at the end of the EU participation, and no later than 2023,
reviewing the performance, quality and impact of the Eurostars programme and of
Eurostars projects.

9.           ANNEXES

Annex
1: SMEs & R&D: comparing the EU and the US

Annex
2: Eurostars model

Annex
3: Eurostars 1- Key results

Annex
4: Eurostars 1 - Success stories

Annex
5: Papers and studies quoted in the present Impact
assessment report

Annex 6: List
of main consultation/expert report documents cited throughout the entire IA
document and their weblink.

Annex
7: Glossary and abbreviations.

              Annex
1:    SMEs & R&D: comparing the EU and the US

Research intensity of SMEs

The EU is lagging behind key competitors as
regards the research intensity of SMEs. This can be shown in two steps:

1. Comparison of the overall level of R&D expenditure performed by
SMEs in the EU and in the US

2. Estimation of the R&D intensities of the SMEs in the EU and in
the US

Comparison of the overall level of
R&D expenditure performed by SMEs in the EU and in the US

The graph below shows the business R&D
expenditure (BERD) performed by SMEs[60] and
larger firms in the EU-25 and in the US, Japan and South Korea, as % of GDP.

Source: DG Research and Innovation - Economic Analysis
Unit

Data: Eurostat, OECD

Notes: (1) EU: Some data were estimated.

             (2) United States: BERD does not include
most or all capital expenditure.

             (3) Japan: BERD by size class is
underestimated.

In the EU R&D spending by SMEs, which
represents 20% of all business expenditure on R&D, amounted in 2009 to
0.26% of GDP, compared to 0.34% in the US and 0.68 % in South Korea.

Estimation of the R&D intensities of
the SMEs in the EU and in the US

The gap to the US is even higher if the
fact that SME's have a larger share of economic activities in the EU than in
the US is taken into account. Due to this structural difference between the two
economies, the best way to compare the level of R&D efforts of the SMEs in
the EU and in the US is to estimate their average R&D intensities (share of
the total SMEs R&D expenditures on the total SMEs added-value).

As shown on the graph below, these
estimations of the R&D intensities reveal a clear R&D intensity deficit
of European SMEs vs. their US counterparts. This deficit is larger than for the
large companies.

Source: DG Research and Innovation -
Economic Analysis
Unit

Data: Eurostat, DG ENTR, OECD

Notes: (1) Gross Value Added does not
include Agriculture, Hunting, Forestry, Fishery and Financial Intermediation.

            (2) SMEs: EU - Size-Class 0-249;
United States - Size-Class 0-299.

            (3) Large Enterprises: EU -
Size-Class 250+; United States - Size-Class 300+.

            (4) The values are estimates.

The role
of SMEs in the lack of innovation dynamism in the EU vs. US

The role of
the SMEs in the lack of innovation dynamism and more specifically in the
overall EU/US R&D intensity deficit has to be assessed from a double
perspective:

From a static point of view, the graph and the figures presented in the section 1 show the
existence of EU/US R&D intensity deficit, larger for SMEs than for larger
firms.

However, the role of SMEs in the deficit is even
much more important from a diachronic point of view. It has indeed to be
considered that some of the large US companies which are now key contributors
to the US BERD were in fact SMEs 20 years ago and that the lack of a similar
development in the EU plays a significant role in the EU/US R&D intensity
deficit (EC 2007, O'Sullivan 2007).

This can be shown through analysing the
data of the EU industrial R&D investment scoreboard[61], as
done notably by Veugelers and Cincera[62]. The
scoreboard data set covers the top R&D investors worldwide, labelled by
Veugelers and Cincera as "leading innovators". Through identifying in
this data set the companies created after 1975, it can be shown that the so-called
"yollies" (young leading innovators: yollies are "firms that
have in a relatively short term have grown into world leaders on the basis of
their R&D efforts, while still remaining independent"[63]) are much more numerous and play a much more important role in the
US than in Europe, as shown in Figure 1 below. Yollies represent more than half
of the total population of US-based leading innovators vs. only 20% of the
EU-based leading innovators. Yollies' shares in R&D investment, sales and
employment of the total population of leading innovators is more than the
triple for the US-based yollies compared to their EU-based counterparts. These
figures reflect the fact that, in the US more than in the EU, in the last
decades, many new, R&D-intensive firms, active in high-tech sectors were
able to develop, grow rapidly and become key economic players.

Source: Veugelers R. and Cincera M. (2010),
"Europe's missing yollies", Bruegel policy brief

In addition, other evidence observed in
regard to R&D performing SMEs compared to US SMEs suggest the greater
dynamism of US high-R&D intensive sector, namely:

a) The average firm size of the top R&D
investors among EU-based companies is larger than that of the firms based in US
(Ortega-Argilés and Brandsma 2010);

and

b) There is a greater concentration of
smaller firms operating in high R&D intensive industries in the US compared
to the EU, and the R&D intensity of such smaller US firms is higher
(Moncada-Paternò-Castello et al., 2010, Moncada-Paternò-Castello, 2010).

              Annex
2:    The Eurostars Model

The
Eurostars model unites members states R&D funding programmes while keeping
their diversity and funding sovereignty.

Eurostars
members keep their R&D peculiarities (e.g. national funding rules) while
complying at the same time with a common set of eligible and evaluation
criteria. On the Funding, Eurostars members fund directly their participant,
while complying with a set of common funding principle (e.g earmaked budget,
respecting the order of the ranking list).

At
the implementation level, the Eurostars model is tailored made to reach the
optimum balance between applicant supports, equal treatment of proposals and
funding bodies cooperation. In this perspective, each stage of the programme
requires a different level of implementation:

ü At the promotion and
submission stages, the most efficient support to applicants is provided by
EUREKA National Project Coordinators.

ü At the eligibility and
evaluation stages, the equal treatment of proposals is ensured trough a
centralised, independent and transparent process, implemented by the EUREKA
Secretariat.

ü At the funding stage,
the cooperation among funding bodies is allowed through an optimized virtual
common pot (earmarked budget for the six years program and capacities to get
additional funding based on the success in the yearly cut offs).

ü At the monitoring and
impact stages, the most efficient support to participant is provided by EUREKA
Funding Bodies.

Graph 1 - The Eurostars Model: an
Efficient & Balanced Model of R&D Joint Programming

Detailed explanation of each stage implementation

At
the promotion stage, potential applicants receive information at regional
and/or national level, through the organization of regional/national info days
organized by EUREKA National Project Coordinators (NPC). At the international
level, the Eurostars website, implemented by the EUREKA Secretariat, provides a
single point of information on the program. The FP7 channels (e.g. SME Tech
web) also promote the programme at the international level.

At
the submission stage, the applicants are put in contact with their
regional/national EUREKA NPC. Once registered through the Eurostars website,
each applicant receives an e-mail with their NPC contact details and the NPCs
receive an email with the applicant contact details. For each potential project
consortium, there is one application form, one single guideline to applicants,
a central submission point (Eurostars website) and one common submission
deadline.

At
the eligibility stage, the applications are reviewed against common eligible
criterias and can be declared ineligible only due to missing documents or
failing to one of the common eligible criteria (e.g. consortium leader has to
be an R&D SME). The EUREKA National Funding Bodies can declare an applicant
ineligible only on the basis of national track record (e.g. no legal entity,
bankrupt)

At
the evaluation stage, each eligible application is remotely and independently
assessed by two technical experts, selected by the EUREKA secretariat. All
eligible applications along with their technical expertise are then ranked by
an Independent Evaluation Panel. The binding ranking list is formally endorsed
by the EUREKA High Level group.

At
the funding stage, each members states indicates up to which project above
threshold they have funds for, based on their earmarked budget and additional
funding. Based on all Member states indications, the EUREKA secretariat produce
the funding list (all projects for which alt least one partner can be funded).
The funding list is approved by the EUREKA High Level Group.  Letters to
successful applicants are then being sent and EUREKA NPCs & applicants have
to sign a final funding agreement (based on national funding rules).

At
the monitoring stage, each applicant receives payments from their national
funding body. The Leader of the consortium sends the consortium agreement,
which is a prerequisite to receive funding, and a progress report, every six
months, to the EUREKA Secretariat. In order to receive EC contribution, each
member states sends a declaration of commitment and expenditures to the EUREKA
secretariat.

At the impact stage, National
Project Coordinators visit and or/interviews some of their funded participants.
At the end of a project, the consortium leader sends a final report to the
EUREKA Secretariat. One, two and three years after project completion, the
consortium leader sends a market impact report to the EUREKA
secretariat.

              Annex
3:    Eurostars 1- Key results

Table 1: Programme performance I

General indicators || COD1 (2008) || COD2 (2009) || COD3 (2010) || COD4 (2010) || COD5 (2011) || COD6 (2011) || COD7 (2012) || COD8 (2012) || TOTAL

Submission and evaluation || || || || || TOTAL

N° of registrations || 1061 || 1746 || 1249 || 1078 || 1361 || 1266 || 987 || 852 || 9600

N° of applications submitted || 215 || 317 || 279 || 316 || 343 || 402 || 365 || 363 || 2600

N° of applicants || 673 || 1115 || 963 || 1061 || 1102 || 1304 || 1181 || 1236 || 8635

% of R&D SMEs and SMEs || 74% || 73% || 71% || 71% || 72% || 72% || 71% || 73% || 72%

Total budget (M€) || 301 || 445 || 390 || 421 || 495 || 556 || 512 || 512 || 3632

N° of applications complete || 191 || 285 || 253 || 287 || 325 || 361 || 314 || 335 || 2016

% of applications complete || 89% || 90% || 91% || 91% || 95% || 90% || 86% || 92% || 90%

N° of applications eligible || 189 || 245 || 236 || 268 || 309 || 348 || 293 || 314 || 2202

% of applications eligible || 88% || 77% || 85% || 85% || 90% || 87% || 80% || 87% || 85%

Threshold || || || || || TOTAL

N° of applications above the threshold || 133 || 111 || 112 || 102 || 110 || 133 || 115 || 112 || 928

% applications above the threshold vs eligible || 70% || 45% || 47% || 38% || 36% || 38% || 39% || 36% || 42%

Total budget (M€) || 206 || 171 || 168 || 130 || 164 || 189 || 170 || 154 || 1354

Approval - funded || || || || || || || || || TOTAL

N° of applications funded || 90 || 90 || 85 || 64 || 71 || 74 || 71 || 68 || 613

% applications funded vs eligible || 48% || 37% || 36% || 24% || 23% || 21% || 24% || 22% || 28%

% applications funded vs above threshold || 68% || 81% || 76% || 63% || 65% || 56% || 62% || 61% || 66%

N° of participants || 288 || 321 || 289 || 212 || 230 || 246 || 238 || 237 || 2061

% of R&D SMEs and SMEs || 74% || 73% || 69% || 67% || 68% || 68% || 64% || 68% || 69%

Total budget (M€) || 128 || 129 || 128 || 81 || 107 || 100 || 111 || 95 || 878

Estimated public funding (M€) || 60 || 58 || 57 || 36 || 41 || 47 || 48 || 47 || 394

N° of countries with funded projects || 27 || 29 || 26 || 24 || 27 || 29 || 21 || 23 || -

Table  2 : Programme performance II

Call management performance || COD1 (2008) || COD2 (2009) || COD3 (2010) || COD4 (2010) || COD5 (2011) || COD6 (2011) || COD7 (2012) || COD8 (2012) || TOTAL

Evaluation || || || || || TOTAL

Number of expertises performed on time ( subm. to IEP) || 376 || 483 || 471 || 536 || 618 || 694 || 586 || 628 || 3764

% of expertises performed on time (submitted to IEP) || 99,5% || 98,6% || 99,8% || 100% || 100% || 99% || 100% || 100% || 100%

Projects with difference expertises :  large variations\* || 17 || 17 || 26 || 25 || 45 || 35 || 28 || 26 || 27

Funding list – approval || || || || || AVERAGE

Top 20 funded projects || 20 || 20 || 20 || 18 || 19 || 20 || 20 || 20 || 20

Top 40 funded projects || 39 || 40 || 40 || 37 || 35 || 36 || 39 || 35 || 38

Top 60 funded projects || 53 || 60 || 54 || 45 || 51 || 48 || 53 || 50 || 52

Top 80 funded projects || 64 || 74 || 70 || 56 || 60 || 59 || 65 || 56 || 63

Number of VETO || 1 || 1 || 0 || 3 || 1 || 1 || 1 || 0 || -

Planning || || || || || AVERAGE

Time to evaluation results (in months) || 3,8 || 3,8 || 3,6 || 3,8 || 4,0 || 3,4 || 3,5 || 3,4 || 3,7

Time to funding results (in months) || 5,6 || 5,6 || 4,9 || 5,2 || 5,5 || 5,4 || 5,1 || 4,7 || 5,3

Time to contract (months) || || || || || || || || || TOTAL

Median - project || 13,2 || 13,2 || 14,1 || 13,2 || 11,2 || 9,2 || 8,4 || - || 12

% info available || 100% || 84% || 84% || 93% || 78% || 71% || 9% || - || 75%

Median - participant || 10,4 || 11,6 || 11,3 || 9,4 || 9,3 || 8,8 || 6,2 || - || 10

% info available || 100% || 93% || 91% || 97% || 91% || 84% || 41% || - || 86%

% Contracts finalized within less than 9 months || 19% || 23% || 30% || 37% || 43% || 58% || - || ||

Median - participant - Top 5 countries || 7,5 || 7,3 || 7,02 || 7,8 || 6,6 || 5,3 || 5,9 || - || -

N° participants involved - Top 5 countries || 29 || 33 || 59 || 33 || 48 || 43 || 47 || - || -

% participants involved vs all participants || 10% || 10% || 20% || 16% || 21% || 17% || 20% || - || -

\* A scoring difference of 2 or more on two or three different evaluation criteria

Table 3: Project portfolio – Funded projects Cut-off 1-8

Main technological area || N° || %

Electronics, IT and telecoms technology || 191 || 31%

Biological sciences / technologies || 173 || 28%

Industrial manufacturing, material and transport || 85 || 14%

Other industrial technologies || 32 || 5%

Technology for protecting man and the environment || 28 || 5%

Energy technology || 28 || 5%

Agriculture and marine resources || 27 || 4%

Chemistry, physical and exact sciences || 21 || 3%

Measurements and standards || 18 || 3%

Agrofood technology || 10 || 2%

Total || 613 || 100%

Main Market area || N° || %

Medical / health related || 172 || 28%

Industrial products / manufacturing || 122 || 20%

Computer related || 48 || 8%

Biotechnology / molecular biology || 39 || 6%

Communications || 39 || 6%

Energy || 36 || 6%

Other electronics related || 35 || 6%

Consumer related || 30 || 5%

Agriculture, forestry and fishing || 28 || 5%

Services || 23 || 4%

Transportation || 22 || 4%

Construction and building products || 19 || 3%

Total || 613 || 100%

Project profile || Average

Average Total costs (M€) || 1,4

Average N° of participants || 3,4

Average N° of countries involved || 2,4

Average duration (months) || 29,2

Type of Consortium || Average

SMEs only || 36%

SME with 1 R&U || 28%

SME with more than 1  R&U || 15%

SMEs with Large companies & Others || 20%

Table 4: Participant profile – Funded projects Cut-off 1-8

Type of participant || Average

R and D Performing SME ||      65%

SME ||      4%

Large company ||      7%

Research Institute ||      11%

University ||      12%

Other ||      1%

N° of employees || R&D SME || SME || || || || ||

0 - 9 || 41% || 28% || || || || ||

10 - 49 || 42% || 48% || || || || ||

50 - 249 || 16% || 24% || || || || ||

+ 250 || 0% || 0% || || || || ||

Costs structure || R and D SME || SME || Large company || University || Research Institute || Other || Grand Total

Personnel || 56% || 54% || 55% || 63% || 58% || 55% || 57%

Overheads || 16% || 17% || 16% || 15% || 23% || 17% || 17%

Travel || 3% || 4% || 4% || 3% || 3% || 5% || 3%

Materials || 13% || 17% || 17% || 13% || 12% || 12% || 13%

Other || 2% || 2% || 3% || 2% || 2% || 6% || 2%

Non-R&D subcontracting || 2% || 2% || 1% || 1% || 1% || 1% || 2%

R&D subcontracting || 7% || 4% || 5% || 2% || 1% || 3% || 6%

% of total costs per type of participant || 76% || 3% || 5% || 8% || 8% || 0% || 100%

Table 5: Countries participation – Cut-off 1-8 || || ||

Country participation in E\* projects || Projects eligible Cut-off 1 to 8 || Projects above threshold Cut-off 1 to 8 || Projects funded Cut-off 1 to 8 || Quality rate: % projects above the threshold vs eligible || Funding rate: % projects funded vs above threshold || Overall success rate: % projects funded vs eligible

AT || 201 || 82 || 56 || 41% || 68% || 28%

BE\* || 105 || 50 || 37 || 48% || 74% || 35%

BG\*\* || 16 || 0 || 0 || 0% || 0% || 0%

CH || 177 || 79 || 69 || 45% || 87% || 39%

CY || 64 || 14 || 8 || 22% || 57% || 13%

CZ || 101 || 34 || 30 || 34% || 88% || 30%

DE || 692 || 331 || 186 || 48% || 56% || 27%

DK || 206 || 102 || 68 || 50% || 67% || 33%

EE || 47 || 19 || 15 || 40% || 79% || 32%

ES || 600 || 184 || 107 || 31% || 58% || 18%

FI || 114 || 39 || 30 || 34% || 77% || 26%

FR || 453 || 207 || 162 || 46% || 78% || 36%

GR || 139 || 43 || 37 || 31% || 86% || 27%

HR\* || 12 || 2 || 1 || 17% || 50% || 8%

HU || 102 || 27 || 18 || 26% || 67% || 18%

IE\* || 36 || 15 || 10 || 42% || 67% || 28%

IL || 146 || 55 || 42 || 38% || 76% || 29%

IS || 21 || 9 || 6 || 43% || 67% || 29%

IT\* || 311 || 108 || 77 || 35% || 71% || 25%

LT || 47 || 15 || 13 || 32% || 87% || 28%

LU\* || 9 || 2 || 2 || 22% || 100% || 22%

LV || 18 || 4 || 2 || 22% || 50% || 11%

MT\*\*\* || 5 || 1 || 1 || 20% || 100% || 20%

NL || 294 || 151 || 101 || 51% || 67% || 34%

NO || 232 || 98 || 62 || 42% || 63% || 27%

PL || 74 || 26 || 19 || 35% || 73% || 26%

PT || 165 || 58 || 38 || 35% || 66% || 23%

RO || 88 || 21 || 16 || 24% || 76% || 18%

SE || 274 || 141 || 99 || 51% || 70% || 36%

SI || 88 || 27 || 19 || 31% || 70% || 22%

SK || 28 || 9 || 5 || 32% || 56% || 18%

TR || 107 || 25 || 18 || 23% || 72% || 17%

UK\* || 348 || 152 || 93 || 44% || 61% || 27%

All projects || 2202 || 928 || 613 || 42% || 66% || 28%

\* Participation as of Cut-off 2 || \*\* Participation as of Cut-off 4 || \*\*\* Participation as of Cut-off 6 ||

Table 6 : National funding || ||

|| || ||

Increased of Earmarked budget || ||

Country || Initial earmarked (first year of participation) || Increase of earmarked budget || Increased budget

AT ||            1.500.000   ||           + 2.500.000   ||            4.000.000

DK ||               500.000   ||           + 2.500.000   ||            3.000.000

NL ||            2.000.000   ||           + 3.000.000   ||            5.000.000

NO ||            2.000.000   ||           + 3.000.000   ||            5.000.000

SE ||            1.500.000   ||           + 2.500.000   ||            4.000.000

UK ||            1.333.333   ||            +  333.333   ||            1.666.666

|| || ||

Additional funds in top of earmarked funds || ||

Country || Total earmarked 2008-2012 || Total national funding 2008-2012\* || Additional national funds 2008-2012

BE ||            6.000.000   ||            9.211.924   ||           + 3.211.924

CH ||           10.000.000   ||           15.319.275   ||           +  5.319.275

CZ ||            5.000.000   ||            5.625.187   ||               + 625.187

DE ||           25.000.000   ||           47.083.805   ||           + 22.083.805

DK ||           10.000.000   ||           13.425.782   ||           + 3.425.782

EE ||            2.500.000   ||            3.328.750   ||            +  828.750

FR ||           25.000.000   ||           31.546.037   ||          +  6.546.037

NL ||           19.000.000   ||           20.588.527   ||          +  1.588.527

NO ||           19.000.000   ||           21.856.141   ||           + 2.856.141

SE ||           15.000.000   ||           20.935.148   ||          +  5.935.148

TR ||            5.000.000   ||            6.299.711   ||          +  1.299.711

UK ||            6.333.331   ||           14.193.716   ||          +  7.860.385

|| || ||

              Annex
4:    Eurostars 1 - Success stories

The
Eurostars Success Stories campaign is an on-going public relations initiative,
designed to increase the visibility of Eurostars activities, and the effect of
products developed in projects on the everyday life of European citizens. Nine
Success Stories have been published on the Internet and in printed publications
since the start of the campaign.

i.
Eurostars MonthlyC2

The
Product:
Monthly C2, a contact lens using a revolutionary new material, soft
silicone hydrogel and designed by computer with nanometer-precision002E

The Story: Precilens, a declining company, saved by an
innovation-minded entrepreneur, who used Eurostars funding to turn his company
into a high-tech SME.

The Market: Precilens opens itself up to a client base just
about twelve times larger than before – nearly 90% of a market worth 4.5
billion euros.

The Impact: The company’s turnover will reach 8 million
euros in 2012. 50 jobs have been saved in the company.

ii.
Eurostars VIDEOSTAR

The
Product:
The Phoenix software package addresses a specific need of the film and
audio-visual industries - the rapid restoration of video-archives.

The Story: Digital Vision diversifies its portfolio of
services and grows from local to global with Eurostars. It has now offices in
Stockholm, London and Los Angeles.

The Market: In the EU, an estimated 40%-70% of existing video
material is in danger of disappearing by 2025.

The Impact: The company’s annual net revenue is now of 10
million euros. The company has grown tenfold since 2006 and recently hired
its 60th employee.

iii.
Eurostars EASTBRED

The
Product:
A non-genetically-modified new breed of harvest crops adapted to the dryer
weather conditions brought on Europe by climate change.

The Story: A Turkish farming-SME called ProGen uses its
geographical location as an advantage to help Europe harness climate change.

The Market: There is an expanding market for harvest-crops
and food products adapted to global warming.

The Impact: Eurostars helped the company to generate an
additional turnover of 330,000 euros and hire 7 new highly qualified
engineers.

iv.
Eurostars Arrayvolution

The
Product:
A genome sequencer built on concepts developed at the MIT, will help
understand a malady’s cause and adapt medical prescription to the patient.

The Story: FlexGen, a spin-off of the Leiden University
Medical centre in Netherlands uses academic knowledge to bring a new product on
the market.

The Market: Main customers are hospitals and pharmacogenetic
specialists in Europe, the United States and Canada. The market is worth 1
billion euros per year.

The Impact: Thanks to Eurostars it should reach 8 million
euros in two years. 20 new jobs will be created thanks to the project.

v.
Eurostars ISTAR

The
Product:
Needle-free injection is a revolution for patients needing
self-injection. The device is called Zeneo.

The Story: A small biotech company called CrossJect attracts
big investors and find the right partner for production on the mass scale.

The Market: First sales are planned for 2014; 150 million
units are to be produced.

The Impact: It will reach 8 million euros in 2012.
CrossJect now plans to double its staff.

vi.
Eurostars IM-ITSHT

The
Product:
Plastic injection process used for the building of car parts but also iPhone
shells.

The Story: RocTool, an SME that has been maturing for
several years finally sees doors open for a product targeting the heavy
industry.

The Market: Roctool supplies its technology on the basis of a
licensing-out model to Eastern-Asian mass-manufacturing companies.

The Impact: After seven profitless years, RocTool’s turnover
is now of 4 million euros a year. 18 new jobs had been created at
the completion of the project.

 vii.
Eurostars TaniXing

The
Product:
A leather tanning agent made from a by-product of olive oil production.

The Story: A small business called N-Zyme, saved its
academic project partner from bankruptcy and helped to bring back the leather
tanning industry to Europe.

The Market: N-Zyme signed a contract with blue-chip company
BMW to participate in the construction of its green-manufactured electric car -
the BMWi.

The Impact: The company’s turnover will reach 2 million
euros in 2015. 3 jobs have been saved and 5 news ones created.

viii.
Eurostars INSIDER

The Product: RAE, a device which adapts the principle of
data-mining to GPS and helps taxi companies to work more efficiently.

The Story: Correlation Systems, a company in isolated Israel
reaches new markets in Eastern Europe thanks to Eurostars.

The Market: The trend for geo-location applications is
rapidly expanding, an example: New York taxi e-hailing app ‘Uber’ now reaching
cities worldwide.

The Impact: The additional turnover expected in two years is
of 10 million euros. 8 new jobs were created in the company.

ix.
Eurostars PhenoCrop

The
Product:
Patented non-genetically-modified traits in crops, developed thanks to an automatized
monitoring system for greenhouses.

The Story: KeyGene leads a ‘green gene revolution’, helping
companies worldwide to adapt crops to local environmental conditions and
increases its output capacities drastically.

The Market: The company now contends with the biggest
corporations in the world on a market estimated to nearly 30 billion euros.

The Impact: Turnover will reach 3,6 million euros in
2014. 5 new jobs were created.

              Annex
5:    Papers and studies quoted in the present Impact assessment report

Acs, Z. J.,
Parsons, W., & Tracy, S. 2008. High-Impact Firms: Gazelles Revisited, in S.
O.  Advocacy (Ed.), SBA Reports. Washington, D.C.: SBA Office of
Advocacy.

Audretsch, D. B. (2002), The Dynamic Role of Small Firms: Evidence
from the U.S. Small Business Economics, 18(1-3): 13-40.

Autio, E. 2007.
GEM 2007 Report on High-Growth Entrepreneurship, GEM Global Reports.
London: GERA

Barajas, A.,
Huergo, E. and Moreno, L. (2012), SMEs Performance and Public Support for
International RJVs, MPRA paper n°42610

Birch, D.,
Haggerty, A., & Parsons, W. (1997). Who's Creating Jobs? Cambridge, MA:
Cognetics.

Bravo-Biosca,
A. (2010), Growth dynamics, Exploring business growth and contraction in Europe
and in the US, NESTA research report November 2010.

Bravo-Biosca,
A. (2011), A look at business growth and contraction in Europe, available at: http://iri.jrc.ec.europa.eu/concord-2011/papers/Bravo-Biosca.pdf

Cincera, M.,
Veugelers. R. (2010), Young Leading Innovators and EU's R&D intensity gap,
available at:  http://iri.jrc.es/papers/2010\_JRC60284\_WP7.pdf

EC (2007), Science,
Technology and Innovation Key Figures 2007, Towards A European Research Area,
p. 34- 36

EC (2011),
Commission Staff Working Document, Impact assessment accompanying the
Communication "Horizon 2020- The Framework Programme for Research and
Innovation (2014-2020) – Annex 2

Hladlik, K.
(1988), R&D and international joint ventures, in F.J. Contractor and P.
Loranges, Cooperative strategies in International Business, pp. 187-203

Henrekson, M.,
& Johansson, D. 2008. Gazelles as Job Creators—A Survey and Interpretation
of the Evidence. Small Business Economics.

Hölzl, W. 2006. Gazelles Scoping Report, Europe Innova Scoping
Reports. Wien: WIFO.

Hottenrott, H.
and Lopes-Bento, C. (2012), (International) R&D Collaboration and SMEs: The
Effectiveness of Targeted Public Support Schemes, ZEW discussion paper n°
12-086

Moncada-Paterno-Castello,
P., Ciupagea C., Smith K., Tübke A., Tubbs M. (2010). "Does Europe perform
too little corporate R&D? A comparison of EU and non-EU corporate R&D
performance". Research Policy.  Elsevier. Vol. 39, No. 4,
p.523-536, May 2010

Moncada-Paternò-Castello,
P. (2010). "Introduction to a special issue: New insights on EU–US
comparison of corporate R&D". Science and Public Policy,
37(6), pages 391–400; July 2010.

Moncada-Paternò-Castello,
P. and Cincera, M. (2012) - "Enterprises' growth potential in the European
Union: Implications for research and innovation policy"- The IUP Journal
of Entrepreneurship Development, - Vol. IX, No. 4, pp 7-40,
November 2012.

Ortega-Argilés R., Potters L., and Voigt P. (2009) –
“R&D-intensive SMEs in Europe: What do we know about them?” – European
Commission – IPTS Working Papers on Corporate R&D and Innovation - JRC
52424:

 http://iri.jrc.ec.europa.eu/docs/papers/2009/15\_IPTS\_WP\_JRC52424.pdf )

Ortega-Argilés
R. and Brandsma A., (2010) "EU-US differences in the size of R&D
intensive firms: do they explain the overall R&D intensity gap? " Science
and Public Policy, 37(6), pages 429–442; July 2010.

O'Sullivan M.
(2007), The EU's R&D Deficit and Innovation Policy, available at: http://ec.europa.eu/invest-in-research/pdf/download\_en/rdd\_deficit\_report0207.pdf

Polt, W.,
Vonortas, N., and Fisher R. (2008), Innovation Impact final report, available
at: http://ec.europa.eu/research/evaluations/pdf/archive/fp6-evidence-base/evaluation\_studies\_and\_reports/evaluation\_studies\_and\_reports\_2008/innovation\_impact\_studies\_final\_report\_2008.pdf

Sakakibara, M.,
(1997), Evaluating Government-Sponsored R&D Consortia in Japan: Who
Benefits and How?, Research Policy, 26 (4/5): 447-473

Storey, D. J. (1994), Understanding the Small Business Sector.
London, UK: Routledge

Teece, D. J. (1992),
Competition, Cooperation and Innovation: Organisational Arrangements for
Regimes of Rapid Technological Progress, Journal of Economic Behavior and
Organisations, 18: 1-25

              Annex
6:    List of main consultation/expert report documents cited throughout the
entire IA document and their weblink.

The following documents can be found at: http://download.eurekanetwork.org/exante/

·
EUROSTARS II -
Results of the Ex-ante consultation towards EUREKA HLRs & NPCs (14 December
2012)

·
EU Summary EU
Analysis Green Paper on a Common Strategic Framework programme for EU and
R&I funding  (2011)

·
E! Summary Analysis
Green Paper Eurostars Analysis

·
EU Summary Reports
Open Workshops on Innovation in SMEs June&July 2011, following Green paper
consultation

·
E! Eurostars-2
Blueprint (June 2011)

·
E! Budapest Document
final (June 2012)

·
Eurostars Interim
report by ESE (2010) including survey to Eurostars registrants and Eurostars
participants

·
Eurostars Impact
Report June 2012 (including survey conducted to Eurostas applicants and
analysis of Eurostars final reports)

·
Eurostars National
Funding Bodies Meeting 2009, 2010, 2011, 2012

·
Eurostars Annual
Reports for 2008, 2009, 2010, 2011

The following documents can be found at: http://ec.europa.eu/research/sme-techweb/index\_en.cfm?pg=publications

·
Eurostars Programme
Interim Evaluation Report by Independent expert group (December 201O)

·
European Commission's Report on Interim
Evaluation of Eurostars (April 2011)

              Annex
7:    glossary and abbreviations

Term || Definition

Article 185 TFEU || Article 185 of the Treaty on the Functioning of the European Union [ex Article 169 of the Treaty establishing the European Community (TEC)] enables the EU to participate in research programmes undertaken jointly by several Member States, including participation in the structures created for the execution of national programmes.

EAG || Eurostars Advisory Group is composed of EUREKA National Project Coordinators (NPCs) from the participating countries. It is chaired by the Head of the EUREKA Secretariat. The Eurostars Advisory Group advises the Eurostars Secretariat on the execution of the Eurostars programme and provides advice on its implementation modalities, such as funding procedures, the evaluation and selection process, synchronisation between the central and national procedures and project monitoring. It advises on the planning for the cut-off dates of the yearly call for proposals. It also advises on the progress of the execution of the Eurostars programme, including the progress towards further integration.

ERA || European Research Area is composed of all research and development activities, programmes and policies in Europe which involve a transnational perspective. Together, they enable researchers, research institutions and businesses to increasingly circulate, compete and co-operate across borders. The aim is to give them access to a Europe-wide open space for knowledge and technologies in which transnational synergies and complementarities are fully exploited. See also ERA COMMUNICATION adopted 17 July 2012

ESE || The Eureka Secretariat (ESE), based in Brussels, is an international association acting as the central support unit for the network. The ESE manages the EUREKA project database and undertakes marketing, communications and network-development activities. It is also responsible for the implementation of the Eurostars programme. The ESE is responsible for: Establishment of the yearly call budget, central organisation of common calls for proposals and reception of the project proposals, central organisation of the eligibility checks as well as evaluation of project proposals, central organisation of the selection of project proposals for funding, as well as project monitoring and follow-up, receipt, allocation and monitoring of the EU financial contribution, collecting the accounts on the distribution of funding by the national funding bodies in the participating States to the partners in Eurostars projects, promotion of the Eurostars programme, reporting to the EUREKA HLG, the Eurostars HLG, the EUREKA Network and the Commission on the Eurostars programme.

EUREKA || EUREKA is an intergovernmental network launched in 1985, to support market-oriented R&D and innovation projects by industry, research institutes and universities across all technological sectors. It is composed of 40 members, including the European Community.

Eurostars member countries || Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom.

FP7 || The 7th Framework Programme of the European Community for research, technological development and demonstration activities.

Gross Value Added (GVA) || GVA is a measure of the value of goods and services produced in an area, industry or sector of an economy. The relationship between GVA and Gross Domestic Product (GDP) is as follows: GVA = GDP + subsidies – taxes on products.

HLG || The Eurostars High Level Group is composed of the EUREKA High-Level Representatives of the States participating in the Eurostars Joint Programme, with a representative of the European Commission as observer. The Eurostars HLG supervises the implementation of the Eurostars programme. It also participates in the nomination of the members of the Eurostars Advisory Group; the approval of the operational procedures to run the Eurostars programme; the approval of the call planning and call budget; and the approval of the ranking list of fundable Eurostars projects.

Horizon 2020 || Horizon 2020 is the European Commission proposal for the next EU Framework Programme for Research and Innovation.

ITRE Committee || Industry, Research and Energy Committee of the European Parliament

NFB || The National Funding Bodies (NFBs) of Eurostars are those agencies designated at national level to deal with the administration of the financial support to the national participants of a Eurostars project

NPCs || Eurostars National Project Coordinators supports: The promotion and information on the Eurostars programme in the EUREKA Member States, possible advice to the applicants, aspects of eligibility checks of project participants and the monitoring of Eurostars projects.

R&D performing SME || The Eurostars Programme defines an R&D - performing SME as an SME that dedicates at least 10% of its turnover or 10 full-time equivalents (FTE) to research activities.

Small and Medium-sized Enterprises -SMEs || Enterprises with: · Employees < 250 · Turnover <  EUR 50 million, and/or, · Balance sheet total < EUR 43 million, and, · Autonomous: < 25% of shares or voting rights owned by "partner enterprise".  See more details in: EU recommendation 2003/361 .

Subsidiarity || The principle of subsidiarity is defined in Article 5 of the Treaty on European Union. It ensures that decisions are taken as closely as possible to the citizen and that constant checks are made to verify that action at Union level is justified in light of the possibilities available at national, regional or local level. Specifically, it is the principle whereby the Union does not take action (except in the areas that fall within its exclusive competence), unless it is more effective than action taken at national, regional or local level. It is closely bound up with the principle of proportionality, which requires that any action by the Union should not go beyond what is necessary to achieve the objectives of the Treaties.

Success rate (in %) || Number of submitted applications divided by approved applications (multiplied by 100).

[1]               EU SMES in 2012: at the crossroads.
Annual report on small and medium-seized enterprises in the EU, 2011/2012.
ECORYS, Rotterdam, September 2012. See http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/files/supporting-documents/2012/annual-report\_en.pdf

[2]               Eurostars initially included 26 EU
Member States and 6 countries associated to the Seventh Framework Programme.
With Malta joining Eurostars in October 2010, all EU Member States participate.
The associated countries are: Croatia, Iceland, Israel, Norway, Switzerland and
Turkey.

[3]               Eureka is a
European Intergovernmental network, established by a Conference of Ministers of
17 countries and Members of the Commission of the European Communities in 1985, with the aims to supporting industrial
research collaboration. It currently counts 40 member
countries and supports also Individual projects, Clusters and Umbrella besides
Eurostars.

[4]               Research-performing
SMEs are SMEs that dedicate at least 10% of their turnover or 10 full-time
equivalents to research and development activities.

[5]               SMEs are defined
according to Commission Recommendation 2003/361/EC. OJ L 124, 20.05.2003, p.
36. See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:124:0036:0041:en:PDF

[6]               Decision
No 743/2008/EC of the European Parliament and of the Council of 9 July 2008, on
the Community’s participation in a research and development programme
undertaken by several Member States aimed at supporting research and
development performing small and medium-sized enterprises. OJ L 201,
30.07.2008, p. 58. See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:201:0058:0067:EN:PDF .

[7]               The EU
contribution comes from the FP7 budget allocated to “Research for the benefit
of SMEs” in the Specific Programme “Capacities” of the Seventh Framework
Programme. Cf. Decision No 1982/2006/EC of the European Parliament and of the
Council of 18 December 2006 concerning the Seventh Framework Programme of the
European Community for research, technological development and demonstration
activities from 2007 to 2013. OJ L 412, 30.12.2006. See http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:412:0001:0041:EN:PDF
.

[8]               Full report: http://ec.europa.eu/research/evaluations/pdf/archive/fp7-evidence-base/other\_fp7\_panel\_evaluations/eurostars\_programme\_interim\_evaluation.pdf

[9]               Council of the
European Union, Brussels, 1 June 2011, 11030/11, Interim evaluation of the
Eurostars Joint Programme – Council conclusions. See http://register.consilium.europa.eu/pdf/en/11/st11/st11030.en11.pdf

[10]             Report
from the Commission to the European Parliament and the Council, Interim
Evaluation of the Eurostars Joint Programme, Brussels, 8 April 2011, COM (2011)
186. See http://ec.europa.eu/research/evaluations/pdf/archive/other\_reports\_studies\_and\_documents/communication\_eurostars.pdf

[11]             215 applications
in 2008 (one cut-off), 317 in 2009 (one cut-off), 595 in 2010 (two cut-offs),
745 in 2011 (two cut-offs) and 728 applications (two cut-offs) received in 2012

[12]             COM(2011) 809 final

[13]             For instance, the survey conducted by ESE in the
context of the Eurostars Impact Report in June 2012 (sent to 6209 Eurostars
applicants, to which 853 (14%) answered. 60% of those from funded projects and
40% from not funded projects. Or the survey performed by ESE, in the context of
the Eurostars Interim Report in May 2010 (sent to 3182 Eurostars registrants to
the Eurostars application site, of which 442 (14%) answered. Out of those, 53%
had submitted a project application of which 59% have been funded).

[14]             Interviews of Eurostars participants: 37 interviews in
10 countries conducted by the independent experts in charge of the Eurostars
Interim Evaluation in 2010

[15]             For instance, the analysis made by ESE in the context
of the Eurostars Impact Report in June 2012 of 173 final reports of Eurostars
participants (of which 72% were R&D performing SMEs).

[16]             For instance the survey by ESE in 2010 in the context
of the Eurostars Interim Report in May 2010 to 32 HLRs of which 26 answered

[17]             Interviews conducted by the Independent Experts in
charge of the Eurostars Interim Evaluation in 2010 to 17 national R&D
Institutions in 10 countries.

[18]             Discussions at the Eurostars National Funding Body
Annual Conference, organised by EUREKA every year since 2009, with 80 participants
each in 2011and in 2012; Deliberations of 'Eurostars-2' Working Groups meetings
(organised by EUREKA), leading to the Eurostars-2 blueprint endorsed in June
2011 by EUREKA HLRs and to the Budapest Document on Eurostars-2 endorsed in
June 2012 by EUREKA Ministers

[19]             Workshops reports
are published on the web: http://ec.europa.eu/research/horizon2020/pdf/workshops/innovation\_in\_small\_and\_medium\_enterprises/summary\_reports\_workshops\_on\_21\_june\_and\_12\_july\_2011.pdf#view=fit&pagemode=none

[20]             ERAC: European
Research Area Committee, advising to both the Commission and the Council,
composed of delegations of all Member States, Associated countries to the
Framework Programme

[21]             See http://ec.europa.eu/research/era/consultation/era-summary-reports\_en.htm

[22]             Ref. Ares(2013)276825 – 01/03/2013

[23]             A key channel for productivity growth is the
re-allocation of jobs from low productive firms to more productive ones: it has
been estimated that difference in firm growth dynamics between the US and the
EU could account for over two-thirds of the EU underperformance vs. the US in
productivity growth in recent decades (Bravo-Biosca, 2010)

[24]             In 2009, the Commission launched a study (Internationalisation
of European SMEs. DG Enterprise/EIM Business & Policy Research. See http://ec.europa.eu/enterprise/policies/sme/market-access/files/internationalisation\_of\_european\_smes\_final\_en.pdf)
to map the level of internationalisation of European SMEs, to identify which
are the main barriers and advantages of internationalisation and to propose
policy recommendations. Among the conclusions were: (1) SMEs active beyond
national boundaries create more jobs and report an employment growth of 7%
versus only 1% for SMEs active only in domestic markets; (2) International SMEs
are more innovative; 26% of internationally active SMEs introduced products or
services that were new for their sector in their country, for other SMEs this
is only 8%.

[25]             See
also research undertaken by JRC, IPTS, Economics of the Industrial Research and
Innovation – IRI action

[26]             GBAORD =
Government Budget Appropriations or Outlays on Research and Development.

[27]             Commission Staff
Working Document, Impact assessment, Accompanying the document Communication
from the Commission, A reinforced European Research Area Partnership for
Excellence and Growth. Brussels, 17.7.2012. SWD (2012) 212 final. See http://ec.europa.eu/research/era/pdf/era-communication/era-impact-assessment\_en.pdf

[28]             Article
185 TFEU (ex Article 169 TEC) reads: " In implementing the multiannual
framework programme, the Union may make provision, in agreement with the Member
States concerned, for participation in research and development programmes
undertaken by several Member States, including participation in the structures
created for the execution of those programmes."

[29]             See
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0808:FIN:en:PDF

[30]             Proposal for a
Regulation of the European Parliament and of the Council establishing Horizon
2020 – The Framework Programme for Research and Innovation (2014-2020),
Brussels 30.11.2011, COM(2011) 809 final. See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0809:FIN:en:PDF
.

[31]             See http://ec.europa.eu/euraxess/pdf/research\_policies/era-communication\_en.pdf
.

[32]             Report from the
Commission to the European Parliament and the Council, Interim Evaluation of
the Eurostars Joint Programme, Brussels, 8 April 2011, COM (2011) 186. See http://ec.europa.eu/research/evaluations/pdf/archive/other\_reports\_studies\_and\_documents/communication\_eurostars.pdf
.

[33]             This is the last Cut-off
available for reference. The
full data set is not yet available for the
following Cut-off dates.

[34]             The EUREKA
secretariat in Brussels is the dedicated implementation structure of Eurostars.

[35]             The network of EUREKA National Project Coordinators (NPCs) / National
Funding Bodies, assure deep local support in terms of promotion, assessment and
monitoring, based on their proximity and an extensive experience in funding
SMEs.

[36]             Communication
from the Commission, Europe 2020, A strategy for smart, sustainable and
inclusive growth, Brussels, 3.3.2010, COM (2010) 2020 final, p. 5. See http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:2020:FIN:EN:PDF

[37]             Communication
from the Commission, Europe 2020 Flagship Initiative, Innovation Union,
Brussels, 6.10.2010, COM(2010) 546 final. See http://ec.europa.eu/research/innovation-union/pdf/innovation-union-communication\_en.pdf

[38]             Partnerships based
on EU Treaty articles 185 and 187 (Joint Technology Initiatives).

[39]             Communication from
the Commission, A Reinforced European Research Area Partnership for Excellence
and Growth, Brussels, 17.7.2012, COM(2012) 392 final. See http://ec.europa.eu/euraxess/pdf/research\_policies/era-communication\_en.pdf

[40]             Proposal
for a COUNCIL DECISION establishing the Specific Programme Implementing Horizon
2020 - The Framework Programme for Research and Innovation (2014-2020) Chapter
3.2.1 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0811:FIN:en:PDF

[41]             R&D performing SMEs in
Eurostars is defined as having at least 10 Full Time Equivalents or at least
10% of its turnover invested on R&D.

[42]             Scientific
integration is achieved through common definition of objectives and
implementation of activities such as the centralised calls for proposals and
project monitoring.

[43]             Based on the
interim evaluation recommendations 12 & 17 and in line with the Eurostars 2
Blueprint endorsed by EUREKA HLRs in June 2011.

[44]             In line with the
Eurostars 2 Blueprint endorsed by EUREKA HLRs in June 2011.

[45]             Based on the
interim evaluation recommendation 18 and in line with the Eurostars 2 Blueprint
endorsed by EUREKA HLRs in June 2011.

[46]             Based on the
interim evaluation recommendation 16 and in line with the Eurostars 2 Budapest
document.

[47]             Based on the
interim evaluation recommendation 15 and in line with the Eurostars 2 Blueprint
endorsed by EUREKA HLRs in June 2011.

[48]             E.g.NESTA Research Summary, October 2009

[49]             Based on the final
reports of the 136 completed projects handed in by 343 participants to those
projects (out of 416)

[50]             Based
on the figures from Eurostars 1
(see footnote 50): 1M€ of public funding gives on
average 3.9 new or improved products, processes or services.

[51]             Source: EUREKA
Secretariat

[52]             Since the final budget from Eurostars
countries is not yet definitive, the EU contribution is indicated with
reference to the information provided by Eurostars countries in January 2013.

[53]             OECD
SME and Entrepreneurship Outlook 2005.

[54]             SME Performance
Review Annual Report 2008.

[55]             The
impact of publicly funded research on innovation: An analysis of European
Framework Programmes for Research and Development. PRO INNO Europe Paper No.
7.2009.

[56]             Impact assessment
of the participation of SMEs in the Thematic Programmes of the Fifth and Sixth
Framework Programmes for RTD – DG Research, 2010

[57]             See footnote 1.

[58]             Veugelers,
R. and Cincera, M. (2010) Young leading innovators and the EU’s R&D
intensity gap', Policy Brief 2010/09, Bruegel, Brussels, http://iri.jrc.ec.europa.eu/docs/papers/2010/2010\_JRC60284\_WP7.pdf

[59]             developed from the
first Eurostars impact report and a EUREKA impact study with 2441 participants.

[60]             SMEs are here defined as firms with less than 250
employees.

[61]             The EU industrial R&D investment scoreboard,
European Commission (DG-JRC and DG-RTD),  http://iri.jrc.ec.europa.eu/home.html

[62]             Veugelers R. and Cincera M. (2010), "Europe's missing
yollies", Bruegel policy brief

[63]             Veugelers R. and Cincera M. (2010), "Europe's
missing yollies", Bruegel policy brief

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