4.2.1 It will be recalled from chapter 3 that award winners expressed a range of objectives in participating in the schemes, although the desire to develop new prototypes, products or services stood out: this being specified by two thirds of them. Table 4.1 shows that 80% of all award winners said that their participation either wholly or largely satisfied their objectives, whereas only 6% said that their objectives were satisfied only to a small extent or not at all. It will also be seen from the table that the extent to which objectives were satisfied varied very little according to class of respondent.
Table 4.1 To what extent did your participation in the GRD scheme satisfy the objectives you were talking about earlier?
Type of grant Size of company Scheme Total Micro Feas/
resch Devel/
excep
1-9 10-49 50+ Smart GRD
Wholly 46 49 44 47 45 50 51 45 46
Largely 34 36 31 36 34 30 36 32 37
Partly 15 11 17 14 15 16 7 17 13
To small extent 4 1 5 2 4 3 4 5 2
Not at all 2 2 2 1 2 2 2 2 1
Effective Sample Size 458 74 234 153 326 93 20 270 209 A number is shown in bold where, taking into account the margin of error due to sampling, we are 95%
certain that it is different from the number in the left hand total column (using a Chi-Squared statistical test)
more recent than Smart projects, GRD award winners were more likely than Smart award winners to be unsure yet of the market impact of their projects. Some 25%
had not taken a product / service to market.
4.3.2 Table 4.2 also shows that smaller, but by no means negligible, proportions of award winners had introduced new/improved processed and /or had delivered R&D or contract research services. As with new/improved products, firms that had undertaken development/exceptional projects were more likely than others to report a market effect related to processes and services. Similarly, GRD award winners were more likely than Smart award winners to be unsure yet of the market impact of processes or services arising from their projects.
Table 4.2 Has, or will, the project result in any new or improved products and services or processes reaching the market, or in offering R&D services / contract research to 3rd parties?
Type of grant Size of company Scheme Total Micro Feas/
resch Devel/
excep
1-9 10-49 50+ Smart GRD
Products:
Yes 67 67 62 75 67 69 72 65 69
No 25 26 28 17 24 27 20 29 16
Not sure 9 7 9 8 9 4 8 5 15
Processes:
Yes 37 21 34 51 35 47 26 35 40 No 55 71 59 40 58 47 66 61 45
Not sure 8 8 7 9 7 6 8 4 16
R&D services / contract research:
Yes 22 17 19 32 22 28 12 20 28
No 70 74 74 60 70 69 76 77 55
Not sure 8 9 7 8 8 3 12 3 17 Effective Sample Size 458 74 234 153 326 93 20 270 209 A number is shown in bold where, taking into account the margin of error due to sampling, we are 95%
certain that it is different from the number in the left hand total column (using a Chi-Squared statistical test) Source: PACEC Survey (Q31A3)
The follow-up interviews with the award winners helped to identify some of the specific products, services, and processes developed. Some generic examples are as follows:
● Satellite antenna
● Smart materials
● Information security
● Blood antigens
● Fuel cells
● Air conditioning
● New machining processes components
● Semiconductor devices
● Browser interface development
● Wave energy
● Screening device
● Equine diagnostics
4.3.3 Table 4.3 shows that nearly eight-in-ten of the firms that had taken projects outputs to the market assessed the level of technological innovation embedded in them as being significant or high. Firms that had undertaken development/exceptional projects were more likely than firms that had undertaken other types of projects to rate their technological innovation in this way.
4.3.4 The table also shows that firms that had been supported by GRD awards were more likely to than those that had been supported by Smart to rate the level of technological innovation in their project outputs highly. It might be, however, that this finding merely reflects the fact that Smart award winners had had the benefit of more time to observe their projects in the market place; and to make an objective assessment. The survey also found that more than half of the Smart projects with outputs that reached the market did so before 2004, whereas only 1% of GRD projects had outputs that had reached the market by the same date.
Table 4.3 (if project outputs taken to the market place) What was the level of technological innovation in these products / services / processes?
Type of grant Size of company Scheme Total Micro Feas/
resch Devel/
excep
1-9 10-49 50+ Smart GRD
Significant 39 32 34 53 40 37 45 33 51
High 40 44 41 36 40 43 36 42 36
Moderate 17 22 21 10 18 14 18 21 10
Low 3 2 4 1 2 6 0 3 3
(14%) but not defined as a product, materials produced (11%) or an output that formed an enabling technology (11%), eg software which met the GRD funding criteria.
Table 4.4 Can you say what output contributed to the benefits of GRD?
Percentage of all respondents (by Type of award) Total Micro Feasibility
/ research
Developm ent
Exceptiona l
Materials 11 8 13 15 0
An emerging technology 8 8 0 15 0 An enabling technology 11 8 13 15 0
A component 14 8 13 15 25
Specific products 76 83 100 46 100
Specific services 16 0 38 23 0
A process / system 16 25 13 15 0 A number is shown in bold where, taking into account the margin of error due to sampling, we are 95%
certain that it is different from the number in the left hand total column (using a Chi-Squared statistical test) Source: PACEC Survey (Q16A)
4.3.5 When asked what, if anything, had prevented/will prevent them from taking the outputs of their projects into the marketplace, nearly a quarter of the respondents cited a lack of finance. This could indicate, on the basis that businesses were aware of public support, that it was less available for the exploitation stage and that there may be some issues with the availability of public finance at this stage. Some 12%
said that they thought their sales prospects were inadequate and that a revenue stream, potentially to attract funders, was not yet apparent, or that the project had failed to achieve its technical objectives (Table 4.5). However, the most common response was ‘none of the above’ (i.e. nothing in particular).
4.3.6 Firms undertaking GRD projects were more likely than those undertaking Smart projects to cite a lack of finance as a barrier, perhaps reflecting the current financial market turmoil. GRD projects were also more likely to cite failure to achieve technical objectives; which is slightly curious given that firms undertaking GRD supported projects were more likely than their Smart counterparts to mention technical objectives (Table 3.16), and that they were just as likely to say their objectives had been satisfied (Table 4.1).
4.3.7 Other noteworthy features of Table 4.5 are that it shows that:
● firms undertaking micro projects and very small firms (1-9 employees) were more likely than others to mention lack of marketing skills as a barrier;
● the tendency to say ‘none of the above’ declined with firm size;
Table 4.5 What, if anything, has prevented, or will prevent, you from introducing the products / services as a result of the project into the market place?
Percentage (%)
Type of grant Size of company Scheme Total Micro Feas/
resch Devel/
excep
1-9 10-49 50+ Smart GRD
Lack of finance 24 26 23 25 26 16 18 20 33 Commercial feasibility: inadequate sales
prospects 12 9 13 12 13 12 2 13 11 Failure to achieve technical objectives 11 17 11 9 11 16 5 9 17 Lack of marketing skills 5 13 4 2 6 0 0 3 7 Competitors’ product(s) / service(s) /
process(es) 4 4 3 4 3 5 0 4 3
High level of risk 3 2 3 4 3 2 5 2 5 Lack of technical skills 2 2 1 3 2 1 0 1 3 Firm had other priorities 2 2 2 2 2 1 0 2 3 Lack of management skills 1 2 1 1 2 0 0 0 3 Lack of access to external expertise 1 0 2 1 2 0 0 2 1 Other(s) 18 26 18 12 21 10 2 21 12 None of the above 42 30 44 46 38 54 74 46 35 Effective Sample Size 440 74 225 145 315 89 19 261 196 Respondents could select more than one option; so percentages in any column may sum to more than 100 A number is shown in bold where, taking into account the margin of error due to sampling, we are 95%
certain that it is different from the number in the left hand total column (using a Chi-Squared statistical test) Source: PACEC Survey (Q34A)
4.3.8 It should also be explained that firms were invited to specify what had made it particularly difficult to introduce project outputs into the market place, but their responses were very little different from the answers summarised in Table 4.5.
Similarly, those saying ‘other’ were invited to specify what this meant, but very few did so.
4.4 R&D and innovation activities
Part of the aim of GRD is to help SMEs undertake research considered to be risky, develop and increase business spend on innovation and R&D, and improve the adaptation of technology, and its use, through research and development. To
d Skills were improved as the technological feasibility of project ideas became clear (91%), the commercial feasibility became clear (84%), and
technological problems were overcome (89%) e The quality of products/services improved (78%)
f Businesses improved their understanding of innovation (80%) and were better able to manage innovation and technical risk (78%)
Collaborative activity and networking on innovation had increased for almost half to three in five of supported businesses.
the findings have the following general features:
● effects on ‘Improved knowledge / skills’ were acknowledged most frequently, along with R&D benefits, and those in the ‘Networks & supply chain
relationships’ least so;
● firms undertaking feasibility/research projects were generally less likely than others to acknowledge effects;
● the responses did not vary greatly according to firm size;
● overall, firms supported by GRD were more likely than those supported by Smart to acknowledge effects.
Table 4.6 Did the project have (or is it likely to have) any of the following Technological problems were overcome 89 92 87 91 89 91 85 88 93 Technical feasibility of the idea has
become clear 91 93 90 93 90 94 94 89 95 Commercial feasibility of the idea has
become clear 84 90 80 89 83 88 85 81 90 Better able to manage innovation /
technical risk 78 81 74 83 75 85 88 79 76 Improved technical knowledge / skills 96 96 94 98 95 97 100 94 98 Improved products / services
Firm improved the quality of its products
/ services 76 82 71 82 76 75 87 78 74 Improved the quality of its processes 62 60 56 76 61 64 80 62 61 Reduced production costs 39 31 35 52 37 45 46 39 38 Improved products / services 80 83 76 87 80 78 96 81 78 Investment in R&D and innovation
Firm improved its attitudes / culture
towards R&D / innovation 70 77 65 74 68 72 80 69 70 New intellectual property has been
developed 65 71 58 77 67 60 55 56 83 New patents have been applied for 47 52 41 55 50 38 31 37 66 Intellectual property (e.g. a patent) has
been obtained 48 51 41 59 50 43 35 42 60 Academic / leading edge research
exploited 44 48 38 55 46 39 26 41 50 Firm has improved its innovation / tech
understanding 80 87 73 88 79 79 92 76 86 Firm is now more inclined to use
external business support 58 67 56 58 59 57 45 57 60 Has collaborated/networked more with
other firms (eg SMEs) 59 66 59 57 60 59 56 60 58 Has collaborated/networked more with
universities and colleges 46 42 45 52 47 46 35 46 48
The businesses that participated in the follow up discussion were asked about the in-house capabilities that were combined with the grant award and the other sources of finance and how important the in-house capabilities were in terms of contributing to the benefits. Just over half (53%) said their management ability was important (and for 8% this was very important), 44% cited energy and hard work (for 11% this was very important) and 42% their ability to focus on the issues and not be distracted by side issues or other “interesting” issues related to the project (17% said this was very important). The other important in-house factors were the financial health of the company (30%), the entrepreneurial and business skills (30%) and the financial management skills of senior staff including their ability to project manage and build relationships with external funders (28%). 14% said this was very important.
Table 4.7 What were the important in-house factors and the main ones that allowed you to achieve the benefits?
Percentage of all respondents (by Type of award) Very important Some importance Important Entrepreneurial / business skills 8 22 30
Management ability 11 42 53
Financial management skills 14 14 28
Marketing skills 8 11 19
Sales skills 8 14 22
Financial health / position 11 19 30
Energy / hard work 11 33 44
Ability to focus on the issues 17 25 42 Market environment opportunity 8 17 25 Source: PACEC Survey (Q20A)
4.5 The ability to attract further finance
4.5.1 Table 4.8 shows that just over one-third of all award winners had sought further finance to enable them to take their project outputs to the marketplace; and, in conjunction with Table 4.2, it suggests that no more than half of the firms whose projects had actually led to the marketplace had sought further finance. The table also shows that, the smaller the firm, the more likely it was to have sought further finance.
Table 4.8 Since participating in the scheme, has your firm sought further finance to enable it to introduce any new or improved products, services or systems into the market place that resulted from the project?
Percentage (%)
Type of grant Size of company Scheme Total Micro Feas/
resch Devel/
excep
1-9 10-49 50+ Smart GRD
Yes 36 29 37 38 40 24 13 36 36
No 62 68 62 59 59 72 81 62 63
Don't know 2 2 1 3 1 4 6 1 2
Effective Sample Size 461 76 236 155 326 94 20 269 211 A number is shown in bold where, taking into account the margin of error due to sampling, we are 95%
certain that it is different from the number in the left hand total column (using a Chi-Squared statistical test) Source: PACEC Survey (Q36)
4.5.2 Table 4.9 shows the sources of further funding sought, offered and accepted. The first part of the table shows that, most commonly, those seeking further finance looked to their RDA or some other public sector source. Smart award winners were more likely than GRD award winners to look to their RDA or another public source, but they were less likely to specify ‘other’. However, very few of the GRD award winners explained what ‘other’ was. The first part of the table also indicates that venture capital and business angel equity and loan finance were popular.
4.5.3 The second and third parts of Table 4.9 imply that most searches for further finance were successful and that most offers of finance were accepted. For example, 48% of firms seeking further finance to take their project outputs to market looked to their RDA/other public source, 42% actually received offers and 40% accepted offers.
4.5.4 The small proportion of firms that did not accept the further finance offered gave three main reasons for doing so, ie: the funding was too risky; the terms were unsatisfactory; and not enough money was offered.
Table 4.9 (if further finance sought to introduce products / services to the market) What type(s) of further finance have you applied for / been offered / accepted.
Percentage (%)
Type of grant Size of company Scheme Total Micro Feas/
resch Devel/
excep
1-9 10-49 50+ Smart GRD
Finance sought
Other RDA / public sector funding 48 36 52 47 47 59 46 54 36 Other(s) 19 31 16 18 18 19 4 14 28 Venture capital equity/share finance 11 8 12 10 11 5 4 10 13 Bank loan 8 13 4 11 8 5 45 6 10 Business angel equity /share capital 8 6 7 11 10 2 0 9 7 Venture capital finance loan 8 8 4 14 8 0 0 6 12 Money from family / friends 5 8 6 3 6 0 0 4 8 Other businesses: equity / share capital 5 1 6 5 4 12 0 6 4 Business angel finance: loan 5 9 5 3 6 0 0 5 5 Effective Sample Size 182 46 89 59 143 25 3 108 82 Offer made
Other RDA / public sector funding 42 34 42 45 41 53 46 46 33 Other(s) 17 25 16 16 17 16 4 13 25 Venture capital equity/share finance 8 4 9 9 8 2 4 7 10
Bank loan 6 10 3 9 5 5 45 5 7
Business angel equity /share capital 6 5 4 10 6 2 0 6 5 Venture capital finance loan 6 3 4 12 7 0 0 4 12 Money from family / friends 5 9 5 3 6 0 0 4 8 Other businesses: equity / share capital 5 1 6 5 4 12 0 6 4 None of the above 15 15 19 7 16 9 0 16 11 Effective Sample Size 177 47 86 60 138 25 3 107 75 Offer accepted
Other RDA / public sector funding 40 34 41 40 38 53 46 44 31 Other(s) 16 25 14 16 16 15 4 11 27 Venture capital equity/share finance 7 3 7 9 7 2 4 6 9 Venture capital finance loan 6 3 3 12 6 0 0 3 12 Money from family / friends 5 9 5 1 6 0 0 4 6
Bank loan 5 8 2 7 4 5 45 4 5
Other businesses: equity / share capital 5 1 6 5 4 12 0 6 4 Business angel equity /share capital 5 1 3 10 6 2 0 5 4
4.5.5 Generally comparisons with finance sought, offered and accepted over different stages of the project or development capital rather than operating capital (ie when alternative and additional finance was sought) shows that businesses improved their prospects of levering in private sector finance, ie offers made, by funders, and accepted increased over the duration of the project, especially for Venture Capital funds (equity / share finance), bank loans and finance from other businesses where merger or acquisitions may occur.. Generally, the applications made over the project period increases for their forms of capital increases, apart from bank loans, as businesses look for equity holding partners, probably linked to advice through board representation.
Table 4.10 shows that half of the firms that did not seek further finance to take their projects outputs into the marketplace explained that they were able to manage without. The medium sized firms (i.e. with 50+ employees) were more likely than others to say this. Small proportions of firms mentioned difficulties obtaining finance, its cost or its riskiness.
Table 4.10 (If further finance not sought) Why did you not seek further funding to enable you to undertake your project?
Percentage (%)
Type of grant Size of company Scheme Total Micro Feas/
resch Devel/
excep
1-9 10-49 50+ Smart GRD
Able to manage without other finance 50 52 46 58 47 59 77 51 48 Wanted to stay independent 8 7 8 9 10 4 0 6 11 Difficulties in obtaining finance 7 6 7 7 9 3 1 5 12 Large cost of finance 7 3 12 0 9 5 0 9 4 The funding was too risky 6 1 9 2 7 2 4 6 5 Not aware of any sources of finance 4 3 6 2 4 5 0 5 2 Unsatisfactory terms were likely 4 13 3 0 6 0 0 4 4
Other 29 25 31 26 30 22 24 29 29
Effective Sample Size 244 40 128 83 159 60 14 139 115 Respondents could select more than one option; so percentages in any column may sum to more than 100 A number is shown in bold where, taking into account the margin of error due to sampling, we are 95%
certain that it is different from the number in the left hand total column (using a Chi-Squared statistical test) Source: PACEC Survey (Q39A)
The follow-up interviews examined the additional sources of funding directly levered
Table 4.11 Which other sources of funding did GRD have most effect
Total (%) Other RDA / public sector funding 47
Bank overdraft 18
Venture capital finance equity / share capital 18
Bank loan 12
Business angel finance: equity / share capital 12 Venture capital finance loan 12 Money from family / friends 6 Bank loan with Small Firms Loan Guarantee 6 Hire purchase / lease finance 6 Trade credit (from suppliers / customers) 6 Other businesses: equity / share capital 6
Other businesses: loan 6
Business angel finance: loan 6
Respondents could select more than one option; so percentages in any column may sum to more than 100 Source: PACEC Survey (Q15B)
With regard to the type of funding used in conjunction with GRD, where it was used, most businesses said it was important but especially bank overdraft facilities for operating finance (almost all businesses), venture capital and/or business angel equity funds which often included external advice, and other public sector funding.
4.5.6 Table 4.12 indicates that half of the firms, but more Smart award winners than GRD award winners, thought that being an award winner made no difference to their ability to obtain finance. However, a similar proportion of firms, but GRD award winners especially, thought that being an award winner made it either much or a little easier.
Part of this is because the award winners have had to go through an application process to review GRD which acts as a form of due diligence. This can give investors more confidence to invest in the GRD businesses and the project and potentially removes some of the risk.
Table 4.12 What effect do you believe being a GRD award recipient has had on your firm's ability to obtain finance?
Percentage (%)
Type of grant Size of company Scheme Total Micro Feas/
reschDevel/
excep 1-9 10-49 50+ Smart GRD Made it much easier 16 13 15 18 17 11 20 13 21 Made it a little easier 32 48 25 36 33 31 21 27 43 Made no difference 50 38 57 44 48 56 58 59 34 Made it a little more difficult 1 0 1 1 1 1 0 1 2 Made it much more difficult 1 0 1 1 1 1 0 1 1 Effective Sample Size 437 69 228 146 311 87 19 261 192 A number is shown in bold where, taking into account the margin of error due to sampling, we are 95%
certain that it is different from the number in the left hand total column (using a Chi-Squared statistical test) Source: PACEC Survey (Q43)
4.5.7 More than half the award winners, but a larger proportion of Smart award winners than GRD award winners, had not claimed R&D tax credits (Table 4.13). A substantial proportion of award winners were not sure, but of the reminder, there was a roughly even split between those that had claimed credits for their Smart/GRD project and those that had claimed for other projects.
Table 4.13 Has your business claimed R&D tax credits?
Percentage (%)
Type of grant Size of company Scheme Total Micro Feas/
resch Devel/
excep
1-9 10-49 50+ Smart GRD
No 54 61 62 35 62 32 32 58 46
Yes other projects only 18 12 14 29 14 27 39 17 19 Yes including this project 15 10 14 20 13 24 11 12 20 Not sure 13 17 10 16 12 17 18 12 15 Effective Sample Size 452 74 233 150 321 91 20 268 201 A number is shown in bold where, taking into account the margin of error due to sampling, we are 95%
certain that it is different from the number in the left hand total column (using a Chi-Squared statistical test) Source: PACEC Survey (Q44)
4.6 The effects and outputs of unsupported projects
4.6.3 Interestingly, Table 4.15 reveals that the proportion of unsuccessful applicants that achieved project outputs that were taken into the marketplace was not much less than the proportion of award winners doing the same. The unsuccessful applicants may have been able to take products and services to market because of relatively low levels of innovation and/or technical risk. Table 3.46 confirms this to some extent in that 43% of unsuccessful applicants thought that they were refused GRD because their project was not innovative enough. Few were turned down at the application
4.6.3 Interestingly, Table 4.15 reveals that the proportion of unsuccessful applicants that achieved project outputs that were taken into the marketplace was not much less than the proportion of award winners doing the same. The unsuccessful applicants may have been able to take products and services to market because of relatively low levels of innovation and/or technical risk. Table 3.46 confirms this to some extent in that 43% of unsuccessful applicants thought that they were refused GRD because their project was not innovative enough. Few were turned down at the application