PACEC PACEC. Evaluation of Grant for Research and Development & Smart. Final Report URN 09/1059. A report prepared by. on behalf of DIUS / LDA

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URN 09/1059

Evaluation of Grant for

Research and Development

& Smart

Final Report

A report prepared by

PACEC

on behalf of DIUS / LDA

PACEC

Public and Corporate Economic Consultants www.pacec.co.uk 49-53 Regent Street Cambridge CB2 1AB Tel: 01223 311649 Fax: 01223 362913 504 Linen Hall 162-168 Regent Street London W1R 5TB Tel: 020 7734 6699

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The Evaluation Team

This report has been prepared by PACEC on behalf of the London Development Agency (with the other English RDAs) and the Department for Innovation, Universities and Skills (DIUS).

The PACEC project team included: Rod Spires Project Director Nic Boyns Project Manager Matt Rooke

Mark Cox

Stephanie Wright Paul Ellis

Professor Alan Hughes, Director of the Centre for Business Research at the University of Cambridge and Director of the Innovation Research Centre provided advice and assistance with the analysis.

The Steering Group on the project consisted of Simon Griffiths and Gary Hellen (London Development Agency), Kevin Sharp (DIUS) with Carol Candler (ONE NorthEast).

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Executive Summary

X1 Introduction

X1.1 In late 2008, the London Development Agency, together with the other RDAs and the Department for Innovation, Universities and Skills, appointed PACEC to carry out an evaluation of Grants for R&D (GRD)1. The main requirement of the evaluation was to assess the achievements and impact of GRD, and its predecessor Smart, on the national economy. The period would be from the point of the last evaluation in 2001, and cover the operation of the scheme from 1 April 1998 to 31 March 2008.

X2

Background to Smart and GRD

X2.1 The GRD scheme was introduced by DTI on 1 June 2003 as a replacement for the former Smart scheme. Between 2001 and the Smart scheme’s closure in March 2003, over 2,500 grants were awarded, worth just under £110M. Since its introduction in April 2003, GRD has helped almost 1,700 SMEs to research and develop technologically innovative new products and processes through over £130M of grant funding. GRD helps small and medium-sized businesses to research and develop technologically innovative products and processes. The following assistance is available:

● Micro Projects are simple low cost development projects lasting no longer than 12 months. The output should be a simple prototype of a novel or innovative product or process. A grant of up to £20,000 is available to businesses with fewer than 10 employees.

● Research Projects typically involve planned research or critical investigation lasting between 6 and 18 months. The result of the project could be new scientific or technical knowledge that may be useful in developing a new product or process. A grant of up to £100,000 is available to businesses with fewer than 50 employees.

● Development Projects involve the shaping of industrial research into a pre-production prototype of a technologically innovative product or industrial process. A grant of up to £250,000 is available for businesses with fewer than 250 employees.

● Exceptional Projects involve technology developments which have higher costs. These projects are likely to generate much wider economic benefits and must have strategic importance for a technology or industrial sector. A grant of up to £500,000 is available to businesses with fewer than 250 employees. (Exceptional Project grants are not available in all regions).

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● Increased business spend on innovation, including R&D ● An increase in the proportion of firms that innovate

● Increased take-up by UK business of the new technology created by the R&D.

X2.4 Its intermediate objectives are:

● To increase the productivity and profitability of assisted SMEs

● To increase and improve technology use and adaptation, and research and development by individuals and SMEs to improve the overall innovation performance of the SME sector

● To increase the number of successful high growth firms that thrive and achieve their potential and to contribute to an enterprise climate that encourages investment in innovative technology by individuals, firms and financial institutions.

X2.5 The scheme’s longer-term objectives are:

● To overcome the reluctance of SMEs to undertake risky research and development by sharing the costs and the risks associated with these kinds of projects, and to foster a recognition of the importance of maintaining an ongoing programme of research and development.

● To encourage others to invest in potentially risky technological R&D through the knowledge that RDAs have undertaken a thorough appraisal of the financial and technical aspects of a project and is prepared to invest public money.

● To support firms to prove the technical and commercial feasibility of their idea (Research/Feasibility projects) and to develop prototypes (Development projects).

X3 Principal

conclusions

X3.1 In relation to the first intermediate objective above to increase productivity and profitability, the research underpinning the evaluation showed that small but significant proportions of supported firms reported increases in their productivity and profitability as a result of their projects. However, these benefits are likely to become more widespread in time because GRD projects have stimulated important intermediate effects including increasing R&D spend and improving the capacity and capability of businesses to manage the process of innovation.

X3.2 In relation to the second objective, the evaluation found strong evidence of increased and improved technology use and adaptation.

X3.3 In relation to the third objective, the breadth of the evidence indicated that supported firms are assisted to thrive. The evidence also strongly showed a greater

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innovation projects by SMEs, arising from risk and uncertainty for investors. Likewise, it was found that firms improve their attitude towards R&D and innovation. X3.5 In relation to the second longer term objective to encourage others to invest in

businesses, there was some evidence that investors are more likely to put money into R&D because projects have been thoroughly appraised prior to start-up and this represents a form of due diligence for them.

X3.6 In relation to the third objective, there was strong evidence that the large majority of both Research/Feasibility projects and Development/Exceptional projects achieve their technical and technology objectives and develop prototypes and products. X3.7 Accordingly, it is concluded overall, that the schemes have been positive and

effective in relation to both their intermediate and their longer-term objectives.

X4

Other key findings on evaluation issues

X4.1 In more detail and reflecting the research brief, some other key evaluation findings were:

Target outputs, eg encouraging technological innovation

1 The most common reason given by award winners for participating in the schemes was to develop new prototypes, products, and services, but a range of other technology-related objectives were also stated. A very large majority of the award winners surveyed had wholly or largely satisfied their objectives. GRD/Smart, therefore, genuinely encouraged technological innovation in SMEs.

2 GRD/Smart-supported projects involved significant technological innovation. Two-thirds of Smart/GRD projects had resulted in new products reaching the market and for smaller proportions new processes had resulted and R&D services were provided to other organisations. Four in ten award winners said that their project outputs that reached the market place embodied significant technological innovation. A similar proportion said that the level of technological innovation was high and advanced.

3 Distinct market failures and in particular the funding gap were addressed by GRD/Smart. The rationale for the schemes focused on the existence of a funding gap for R&D / innovation projects for SMEs, arising from relatively high levels of risk and uncertainty associated with these activities. The overwhelming majority of award winners were prevented from pursuing their objectives prior to receiving support from the scheme because of a lack of finance / lack of ability to attract finance. Smaller proportions also specifically

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6 However, the stakeholders considered that GRD could be improved by involving them more in planning and engaging them to a greater extent, which would help increase the synergies and impact. GRD could be

marketed more across the sectors and the application process streamlined. They also thought that the types of innovation schemes could be clarified and for business the number reduced. Stakeholders were keen that GRD should be reintroduced to London.

7 Overall the awards were more focussed on the mechanical engineering, computing, instruments and chemicals sectors. In total these accounted for 48% of the 4125 awards with awards in other manufacturing and service sectors being relatively small.

Intermediate effects and outputs: as a result of GRD

1 Fewer than three-in-ten award winners sought alternative funding for their projects before applying for Smart/GRD funding; and searches were often unsuccessful. However, some businesses did not take it because of the conditions attached and indicated that the GRD funding was adequate. By contrast, although a slightly smaller proportion sought additional funding in conjunction with their awards and to take their products to market, these searches were less likely to fail and included venture capital, equity finance and bank loans. Award winners were, generally, successful in seeking further finance, as a result of GRD, to take their project outputs to market. 2 On the issue of whether the schemes made businesses more likely to attract

finance than unsupported businesses, it was found that unsuccessful applicants were twice as likely as award winners to say that a lack of finance prevented them, or would prevent them, from introducing their project outputs into the market place.

3 The Small Firms Loan Guarantee Scheme seems to have played only a small role in financing projects.

4 The evaluation provides some evidence that Smart/GRD winners are more likely to use equity finance compared to unsuccessful applicants and that the award, and progress made on projects, helps them do this.

5 GRD/Smart projects frequently lead to new intellectual property: almost two-thirds of the businesses supported reported that their projects had led to the development of new IP; almost half said that new patents had been applied for; and almost half said that IP (e.g. a patent) had been obtained.

6 One third of businesses had gone on to claim R&D tax credits linked to GRD projects. GRD-supported businesses are more likely to do this compared to Smart-supported businesses.

Effects on business performance/ behaviour

1 On the longer-term impacts of GRD/Smart, with respect to the development of supported SMEs, there was a range of generally positive evidence. It was found, for example, that participating in the schemes made firms more innovative and expenditure on R&D increased. It was also found that virtually all of the businesses experienced improvements in aspects of their capability and capacity. It was also found that two-thirds of businesses reported one or more business performance effects, which were generally thought to be

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on-become better able to manage innovation / technical risk and 80% said that they had improved their innovation / technical understanding.

4 After supported projects were completed, a lack of finance remained the principal barrier to undertaking future R&D for businesses although GRD had improved the prospects of obtaining finance. However, the lack of finance post-GRD support had diminished compared to the situation pre-support. 5 A little under half of the businesses said that their participation had a positive

effect on enabling them to exploit academic / leading edge research. A similar proportion reported that participation led them to collaborate more with the tertiary sector and with research /technology organisations and innovation partners.

Economic Impacts: cost-effectiveness

1 The £239 million in grants during the evaluation period had led to the creation of between 6,000 and 9,000 net additional jobs (without and with multiplier effects respectively) and between £400 million and £600 million net additional Gross Value Added (GVA) (without and with multiplier effects) or over £2.5bn cumulatively. Supported businesses also experienced a range of other business performance effects, and it was found that the schemes were associated with positive spill-over effects (eg through linkages) and multiplier effects.

The cost effectiveness ratios indicate that the net cost per FTE job for GRD was £40k and £27k (without and with multiplier effects). The cost per £1 increase in net GVA was £0.60 and £0.40 (without and with multiplier effects).

On the basis of this evidence, it is concluded that the schemes represent good value for money

2 In terms of both employment generation and GVA effects, Micro projects appear to offer the best value for money overall. Feasibility/research projects offer better value than development/exceptional projects in terms of

employment generation, but the reverse is true for the to GVA effects. 3 There was very little deadweight associated with the employment and GVA

effects of the schemes. Displacement rates were higher than deadweight rates, but it is difficult to envisage how these might be reduced. Businesses were generally happy with the amount of scheme finance received.

Targeting on more innovative companies may improve the impacts but the deadweight ratio may increase if these companies were likely to proceed with their projects anyway. Targeting less innovative companies may raise the deadweight ratios and result in less innovative projects and fewer technology benefits.

4 Where Micro projects are taken up by new starts the investment impacts could be higher for GRD.

5 Businesses increased their R&D expenditure and skills as a result of GRD. As these translated into innovation there was greater collaboration to

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X4.2 The total economic impacts are potentially somewhat greater because of intermediate effects on capabilities of businesses and the wider technology diffusion effects.

X5 Methodology

X5.1 An evaluation framework for GRD was developed to guide the research. It was based on the general approach provided in the BERR / RDA Impact Evaluation Framework (IEF) guidance and customised for GRD.

X5.2 The research programme to derive the data to populate the framework was shaped by the aims of the evaluation and by the information available from the RDAs and DIUS. In addition to quantitative impacts, it took account of the qualitative impacts which arise from GRD activities and expenditure. This provided a more rounded analysis of the impacts and benefits and provides evidence of changes in practices which help underpin the pure economic impacts which arise primarily through the improved performance of businesses. It comprised an integrated set of tasks agreed with the Steering Group for the project and resulted in almost 1,000 interviews with some business beneficiaries and stakeholders.

X5.3 The main components of the research programme were:

● A survey of GRD recipients. This involved a telephone interview with 659 businesses selected to be representative of the wider population of award winners in terms of the type of award received, the size of award businesses, the period of award and the RDA location). Interviews sought to examine,

inter alia: their background, reasons for applying, barriers faced and use of

other finance; whether their projects would have gone ahead without Smart support; the intermediate and business performance effects of their projects; the extent to which they used other support as well as Smart, the wider effects (e.g. on competitors and suppliers); and their views on the Smart process and how the scheme might be improved.

● Follow-up interviews with Smart / GRD grant recipients. These involved 40 follow-up interviews with a representative sub-sample of award winners, coupled with a review of information relating to some of their projects. The issues covered broadly the same issues as the larger telephone survey of grant recipients, but in greater depth, and to obtain an expert view of the technological value of GRD supported projects.

● A survey of unsuccessful applicants for Smart / GRD grants. This involved a telephone interview with firms selected to be representative of the wider population of 191 non-award winners. This sample of businesses formed a comparison group. The interview was in part to discover what happened to proposed projects that were not supported and, hence, to assist with the examination of the extent to which supported projects would have gone ahead anyway.

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innovation aims and policies of the RDAs and the potential relationship between GRD and other schemes.

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1 Introduction

1.1.1 In October 2008 the London Development Agency (LDA) together with the other RDAs and the Department for Innovation, Universities and Skills (DIUS) appointed PACEC to carry out an evaluation of Grant for R&D (GRD)2_{. The main requirement}

of the evaluation was to assess the achievements and impact of Smart / GRD3, and its predecessor Smart, on the national economy. The period would be from the point of the last evaluation in 20014, and cover the operation of the scheme from 1 April 1998 to 31 March 2008.

1.1.2 A key issue is to examine the effectiveness and efficiency of GRD in terms of the outputs and outcomes that flow and the benefits to businesses and the economy. 1.1.3 There are also a series of specific research questions. The evaluation should

examine whether the objectives for Grant for R&D/Smart have been met during the evaluation period. The evaluation should address some specific subject areas and questions, examples of which are as follows:

● Overall project targets

- To what extent has GRD/Smart genuinely encouraged technological innovation is SMEs?

- To what extent have GRD/Smart-supported projects involved significant technological innovation?

- To what extent are distinct market failures being addressed by GRD? ● Intermediate effects and outputs

- What proportion of GRD/Smart-supported projects have resulted in successful outcomes, eg new products/services?

- To what extent GRD/Smart levered-in private sector finance into supported firms, and what factors influence these investments? Do GRD/Smart make the business more likely to attract finance than unsupported businesses?

● Effects on business performance

- What have been the longer-term impacts of GRD/Smart, with respect to the development of supported SMEs?

- Do supported businesses go on to spend more on R&D than the sector average?

● Wider effects

- Is GRD/Smart good value for money, in terms of economic benefits created, taking into account identifiable spill-over effects through the main diffusion mechanisms?

- Which project types offer the best value for money? ● Economic impacts and cost effectiveness

- What have been the longer-term impacts of GRD/Smart with respect to development and dissemination of significant innovation?

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- What have been the impacts of GRD/Smart with respect to RDA Regional Economic Strategies?

1.1.4 These are given in more detail in Appendix A and considered more fully in the concluding chapter.

1.1.5 In addition to the national evaluation a review of GRD in London has been carried out to assess the strategic impact of GRD on London businesses, and to what extent the grant has delivered activities that no other product is delivering in London. This will enable comparisons primarily with other LDA and non LDA business support products and from that enable the LDA to shape future business support in London.

1.1.6 GRD is likely to be revised in April 2009 as part of the Business Support Simplification Programme (BSSP). Under the terms of the BSSP it is essential that business support products are regularly reviewed and evaluated to ensure that the original rationale for their introduction remains, and to assist in the future development of the product.

1.1.7 The evaluation was also to be compliant with the Impact Evaluation Framework (IEF) developed by BERR and the RDAs5.

1.2 Background to SMART and GRD

1.2.1 Grant for Research and Development was introduced by DTI on 1 June 2003 as a replacement for the former Smart scheme. Between April 1999 and the Smart scheme’s closure on 31 August 2003, over 2,500 grants were awarded worth just under £110M. Since its introduction, Grant for R&D has helped almost 1,700 SMEs to research and develop technologically innovative new products and processes through over £130M of grant funding. GRD helps small and medium-sized businesses to research and develop technologically innovative products and processes. The following assistance is available:

● Micro Projects are simple low cost development projects lasting no longer than 12 months. The output should be a simple prototype of a novel or innovative product or process. A grant of up to £20,000 is available to businesses with fewer than 10 employees.

● Research Projects typically involve planned research or critical investigation lasting between 6 and 18 months. The result of the project could be new scientific or technical knowledge that may be useful in developing a new product or process. A grant of up to £100,000 is available to businesses with

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and must have strategic importance for a technology or industrial sector. A grant of up to £500,000 is available to businesses with fewer than 250 employees. (Exceptional Project grants are not available in all regions). 1.2.2 Responsibility for delivering Grant for R&D transferred from DTI to the RDAs in April

2005 following its introduction on 1 June 2003. The move to separate policy from delivery was designed to improve the effectiveness of the scheme by bringing key decisions closer to customers. RDAs understand well the opportunities and challenges faced by businesses in their region and are able to use their close relationship with regional partners to ensure the support available best meets the needs of business.

1.2.3 National policy objectives are embedded in a framework agreement that sets out the respective roles of DIUS and the RDAs and within this RDAs can define relevant delivery models. Grant for R&D has the following longer term objectives:

● To overcome the reluctance of SMEs to undertake risky research and development by sharing the costs and the risks associated with these kinds of projects, and to foster a recognition of the importance of maintaining an ongoing programme of research and development.

● To support firms to prove the technical and commercial feasibility of their idea (Research/Feasibility projects) and to develop prototypes (Development projects).

● To encourage others to invest in potentially risky technological R&D through the knowledge that RDAs have undertaken a thorough appraisal of the financial and technical aspects of a project and is prepared to invest public money.

1.2.4 GRD was set up to address national priorities for:

● Increased business spend on innovation including R&D ● An increase in the proportion of firms that innovate

● Increased take-up by UK business of the new technology created by the R&D 1.2.5 GRD has some Intermediate objectives:

● To increase the productivity and profitability of assisted SMEs

● To increase and improve the adaptation of technology and its use through research and development by individuals and SMEs and as a result to improve the overall innovation performance of the SME sector

● To increase the number of successful high growth firms that thrive and achieve their potential and to contribute to an enterprise climate that encourages investment in innovative technology by individuals, firms and financial institutions.

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research as shown in Table 1.1. It develops the general approach provided in the BERR / RDA Impact Evaluation Framework (IEF)6 guidance.

1.3.2 To assess the GRD impacts (eg quantified jobs), the evaluation framework shows the process (or implementation) chain which links policy aims, expenditure (with partners) which results in the engagement of business and the take-up of GRD. This in turn impacts on business activities and practices and business performance (eg Gross Value Added and jobs) and wider spillover effects (including Strategic Added Value) through the involvement of partners and stakeholders. GRD support culminates in gross and net economic impacts (eg employment, business creation and Gross Value Added) and hence the final economic effects at the national and regional levels.

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Table 1.1 Evaluation Framework for SMART / GRD

1: The Objectives and Aims of GRD

 To overcome SME resistance to R&D  Increase: R&D spend, innovation  Encourage investment by others  Increase scientific / technical

knowledge

 Develop products / processes

 Increase pre production prototypes  Stimulate important: technologies /

sectors

 Growth in GVA / economic performance

2: The Inputs, Expenditure and Delivery

 Total GRD and Smart expenditure  Increased R&D spend

 Expenditure of Partners and leverage (ie risk reduction)  Strategic Added Value through partner involvement

3: Take-up of GRD

 Scheme design and delivery  Number of GRD applicants and

awards

 Age, size, sector of SMEs

 Technology categories  Collaborative activity and risk

reduction

4: The Intermediate Outputs. Activities and Practices of Businesses Gross/Net Additional. For example

 Addressing market failure issues and barriers eg reduction of risk

 Satisfaction / aims of SMEs

 Improved understanding of innovation  Improve technology / innovation  Increase R&D activity / spend  Lever in support / finance eg other

schemes / partners  Exploit academic research

 Better management of innovation  Skills development

 Greater networking / collaboration  New products / processes

 Successful / new IPR

5: The Impact on the Performance of Businesses Gross/Net Additional. For example:

 Exploitation of products / services  Turnover, employment, business starts  Profitability and productivity

6: Wider Spillover Effects and Strategic Added Value

 Transfer of technology / knowledge (eg suppliers)  Transfer of practices (eg suppliers)

 Any displacement / leakage / multiplier effects  Strategic Added Value through partner involvement

7: The Final Economic Impact / Outcomes

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attributable) initial impacts (eg business skills and practices, quantified jobs and

Gross Value Added) are subject to deadweight and what may have occurred

anyway. This results in gross direct outputs. There are then displacement issues, ie some businesses benefit at the expense of others nationally and in the regions (or crowding out issues – ie businesses do not start-up and leakage (of expenditure) effects and indirect multipliers and linkages lead to the net additional

outputs and outcomes. This reflects the IEF guidance which needs to be customised for GRD.

Table 1.2 Key Steps: Gross to Net Additional Economic Outcomes

Gross attributable impacts

(i.e. changes in GVA & employment as a result of the support)

Less

Deadweight – counterfactual

(i.e. changes that would have happened anyway)

Equals

Gross additional impact

(i.e. effects attributable to the support)

Less

Displacement

(i.e. increases in GVA/employment at the expense of competitors)

Equals

Net additional effects

(or total measurable annual economic impacts without linkages and multipliers)

Plus

Linkages and multipliers

(i.e. effects due to purchases by businesses and their staff )

Equals

Full net additional effects

(or total measurable annual economic impacts)

Multiplied by

Average duration

(in the case of GVA, how many years the effect lasts)

Equals

Cumulative net effect

(i.e. total cumulative measurable economic impact)

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The Research Programme

1.3.5 The research programme has been shaped by the aims of the evaluation and by the information available from the RDAs and DIUS, to undertake it. In addition to quantitative impacts, it has taken account of the qualitative impacts which arise from GRD activities and expenditure. This provides a more rounded analysis of the impacts and benefits and provides evidence of changes in practices which help underpin the pure economic impacts which arise primarily through the improved performance of businesses. See the Evaluation Framework. It has comprised an integrated set of tasks agreed with the Steering Group for the project and resulted in almost 1,000 interviews with some business beneficiaries and stakeholders.

1 Inception Stage and Research Plan. This involved working with the Steering Group to scope the project fully, agree the focus, and gain insights into the issues. At this stage the relevant policy documents and research reports were identified and contacts within each of the RDAs agreed. PACEC worked closely with the Steering Group to select the sample of businesses and stakeholders for the evaluation to ensure the impacts could be measured with confidence.

2 Interviews with RDAs. This covered how the scheme was operated and insights into the impacts and benefits. The RDAs also suggested a sample of stakeholders to interview in each of the regions (see below).

3 A Desk Study. This covered the key policy documents on Smart and GRD and the evolving policy framework, the management information on the applications for GRD and approvals, and the background information on the RDAs including their Regional Economic Strategies, Innovation Strategies, and policies on innovation and any relevant evaluations carried out on innovation programmes.

4 A survey of GRD and Smart recipients. This involved a telephone interview with 659 businesses selected to be representative of the wider population of award winners in terms of the type of award received, the size of award businesses, the period of award and the RDA location). Interviews sought to examine, inter alia: their background, reasons for applying, barriers faced and use of other finance; whether their projects would have gone ahead without Smart support; the intermediate and business performance effects of their projects; the extent to which they used other support as well as Smart, the wider effects (eg on competitors and suppliers); and their views on the Smart process and how the scheme might be improved.

5 Follow-up interviews with Smart / GRD grant recipients. These involved 40 follow-up interviews with a representative sub-sample of award winners, where there had been positive impacts. The issues covered broadly the same issues as the larger telephone survey of grant recipients, but in greater depth, and to obtain an expert view of the technological value of GRD supported projects. The results are incorporated into the text at appropriate points.

6 A survey of unsuccessful applicants for Smart / GRD grants. This involved a telephone interview with firms selected to be representative of the

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7 A Stakeholder Survey. This was held with organisations in the RDA areas to examine the views in the impact of GRD on businesses, its influence on the policies, activities, and resources of stakeholders (ie Strategic Added Value or SAV) and potential improvements to GRD.

1.3.6 The survey of award winners and in-depth interviews covered award winners in the period from 1999/2000 to 2007/08. While award winners in 2007/08 are unlikely to have experienced the full effect of their awards, they are included in the sample since they give an insight into how the scheme is currently operating. The survey of unsuccessful applicants included only those from later years up to 2007/08 because contact details for unsuccessful applicants in earlier years were not available. Appendix B to this report includes detailed outlines of the method of analysis used.

1.4 Analysis of the business surveys

1.4.1 The majority of results tabulations in this report are based on univariate analysis of survey data, showing the proportion of interviewees giving particular responses to individual survey questions (e.g. % of respondents saying that their overall objective was to grow rapidly, % saying their objective was to grow moderately, etc.).

1.4.2 In addition, the tables indicate the effective sample size. This is approximately equal to the number of respondents, but it takes into account the weighting which is used to ensure that the best estimates of the overall population of award recipients is given. Further details are given in Appendix B.

1.4.3 As well as showing the results for all respondents combined, the tables disaggregate the responses according to type of respondent or project. Those tables in the main body of the report disaggregate the all-respondents responses according to type of GRD award (Micro, Research, Development), size of firm (micro-, small or medium) and type of award (ie SMART or GRD). Appendix C contains the main results tabulations disaggregated according to the RDA regions and Appendix D tabulations disaggregated according to the sector of firm; and GRD pre and post RDA delivery. 1.4.4 The tables also show where disaggregated results are significantly different from the

results for all respondents using the Chi-squared test at the 95% level (e.g. whether micro-firms were significantly more likely than firms of all sizes combined to give a particular response).

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1.5 Structure of the report

1.5.1 The evaluation framework used was one which is based on a logic chain model in terms of the impacts and reflects the BERR / RDAs Impact Evaluation Framework7_.

This links inputs (i.e. GRD support) to activities (i.e. GRD projects), to intermediate effects (e.g. changes in business capabilities), to business performance effects (e.g. growth in Gross Value Added) and, finally, to economic impacts (allowing for wider positive and effects of projects). The questionnaires and interview agendas were designed to examine the logic chain and the links in the model.

1.5.2 The structure of the report broadly reflects the logic impact chain and the model. Hence:

● Chapter 2 focuses mainly on the number and pattern of Smart/GRD awards over the evaluation period.

● Chapter 3 mainly examines the characteristics of award winners, what projects sought to achieve, whether they would have gone ahead unsupported, and the additionality.

● Chapter 4 explores the extent to which projects succeeded, the intermediate effects, and how they changed the capabilities and practices of award winners.

● Chapter 5 analyses the collective business performance effects of projects and assesses the extent to which GRD explains the changes observed. ● Chapter 6 examines the wider positive and negative effects of the scheme. ● Chapter 7 sums the total economic impacts of the scheme and examines the

cost effectiveness and value for money it provides.

● Chapter 8 reports a variety of views on the usefulness of different aspects of the scheme, and considers how its operation might be improved.

● Chapter 9 examines the view of stakeholders and partners on GRD and its strategic impact and added value (SAV).

● Lastly, Chapter 10 uses the research findings to address the key evaluation questions .

1.5.3 The Appendices show the key evaluation questions, methodology, and data disaggregations for regions and sectors and the results of the evaluation of GRD in London.

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2 Take up and market penetration of the GRD scheme

2.1 Introduction

2.1.1 This chapter examines the delivery of GRD and patterns and trends in the expenditure and take-up (or participation in GRD) and provides some simple measures of application success rates and scheme market penetration. Important distinctions are made between the number of awards and the number of individuals and firms receiving awards. The latter is somewhat smaller than the former because it is possible for firms and individuals to receive more than one award.

The Delivery of GRD and Expenditure

The way in which GRD is delivered across the RDAs in fairly similar, reflecting the national model for Smart/GRD developed by DTI (now DIUS) with some small variations reflecting regional circumstances and opportunities. The main features are as follows:

a RDA Aims and Objectives. These reflect the national aims and market failure rationale for GRD and reflect the Regional Economic Strategies adopted by RDAs and, in several regions, the separate innovation strategies where GRD has been specifically referred to as an innovation support scheme.

b All RDAs, at the time of the evaluation, delivered GRD with internal staff, usually within an innovation business support or business finance team. c GRD was promoted and marketed primarily through attending events (with

presentations), leaflets, the RDA websites and via intermediaries including advisers and some specialist individuals / organisations who provided SMEs with advice and could organise GRD applications for funding.

d Prior to receiving applications the GRD team could hold discussions with potential applicants to provide advice on the criteria and what finance was available. At this stage potential applicants could be dissuaded from applying or to defer their applications until there was a better fit with the criteria for funding.

e The criteria for deciding on who gets a grant where businesses are eligible usually include8:

- Alignment to the RES and Innovation Strategy

- Technology (eg novelty and new technology to the industry, innovation which would result in an alternative of significant improvement to products / processes, and technological advance associated with technological challenges

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- The wider aspects which may include economic, social and environmental benefits

RDAs do not formally target industrial sectors with GRD, although indirectly applications may be drawn from the sectors / clusters they prioritise which is the case with most RDAs.

Technical advisers can be sought to help appraise applications and would be drawn from established government or RDA contacts on a confidential basis.

The delivery process also involves a wider group of organisations involved in innovation as stakeholders or partners. These liaise with GRD applicants, refer them to the RDA teams, assist with the applications and provide ongoing support referral and signposting to other schemes. These partners and stakeholders also provide support to businesses through advice and finance.

The overall policies of RDAs provide the strategic context for GRD. All RDAs have a policy on innovation in their Regional Economic Strategies and four have separate innovation strategies with a strong commitment to R&D, innovation, and the exploitation of products, services and processes. These have generated a range of support for innovation and GRD can form part of a suite of schemes. Figure 2.1 illustrates the relationship of GRD to other generic types of innovation support programmes. The generic programmes do not necessarily reflect the names used by RDAs. There are two axes: the product stages and the company stages of development.

Figure 2.1 RDA Funding Ladder for Innovation

PRODUCTION TECHNOLOGY PROTOTYPE IDEA TECHNICAL FEASIBILITY

SEED START-UP EARLY

STAGE GROWTH SUSTAINED GROWTH PRODUCT STAGE PRODUCT Seed funding Proof of Concept GRD Loan Funds

Other innovation support HE collaboration Equity Funds

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In the evaluation period 1999/2000 to 2007/2008 the total expenditure on Smart/GRD was £239m with some £118m (50%) for development awards, £88.3m for research projects (37%), £21.9m (9%) for exceptional projects and £10.5m (4%) for micro awards. Greatest expenditure was in the North West (£39.1m), followed by the East (£37.1m) and South East (£34.7m) and. Expenditure was lowest in the North East at around £15.4m.

Table 2.1 The Value of Smart/GRD Awards

Value of awards (£m)

Micro Research Development Exceptional Total

South East 1.6 12.7 14.7 5.7 34.7 East 0.8 14.2 17.5 4.6 37.1 London 0.8 10.1 9.7 1.5 22.1 South West 1.2 5.1 8.0 1.5 15.8 West Midlands 0.5 7.2 8.5 0.8 17.0 East Midlands 1.5 8.9 15.5 0.8 26.7

Yorkshire and Humberside 1.5 10.9 17.7 1.2 31.4

North West 1.9 13.7 19.3 4.1 39.1

North East 0.8 5.5 7.3 1.7 15.4

England 10.5 88.3 118.4 21.9 239.1

Source: PACEC

The average size of awards in England was £399K (exceptional projects), £104k (development projects), £39k (research projects) and £14k (for micro projects). The overall average was £57k. Generally, the larger average awards were given in the East, the South East, London (which may reflect higher costs for businesses in the regions) and the North East.

Table 2.2 The Average Size of Awards (£k)

Average size of awards (£k)

Micro Research Development Exceptional Total

South East 14 49 105 435 66

East 15 46 107 380 69

London 15 50 124 309 65

South West 13 41 98 381 53

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nationally in the East Midlands and Yorkshire and Humberside (as the main form of grant). Exceptional awards were higher in the South East and micro awards in the South West. Research awards were highest in London.

Table 2.3 Awards by Value for the RDAs (%)

Breakdown by type of award(%)

Micro Research Development Exceptional

South East 5 37 43 16 East 2 38 47 12 London 4 46 44 7 South West 7 32 51 10 West Midlands 3 42 50 5 East Midlands 6 33 58 3

Yorkshire and Humberside 5 35 57 4

North West 5 35 49 10

North East 5 36 48 11

England 4 37 50 9

Source: PACEC

2.2 Number of awards and application success rates

2.2.1 Table 2.1 shows the number of Smart/GRD awards made during the period covered by the survey work (1999-2008). It indicates that the number of Research awards has fallen by a factor of 2 or 3, to become similar to the number of Development awards.

Table 2.4 Number of Smart/GRD awards, 1999-2008

Type of Award

Period: Development Exceptional Research Micro All types

Apr99-Mar01 257 7 678 120 1,062 Apr01-Mar03 290 14 960 209 1,473 Apr03-Mar05 255 17 268 179 719 Apr05-Mar07 216 6 247 146 615 Apr07-Mar08 122 11 132 81 346 Smart (Apr99-Mar03) 547 21 1,638 329 2,535 GRD (Apr03-Mar08) 593 34 647 406 1,680 Total 1,140 55 2,285 735 4,215

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application success rate has been positively correlated with firm size. This is interpreted as reflecting a greater familiarity with application processes for Government support schemes amongst non-micro firms, coupled with their greater ability to marshal the resources necessary to prepare good quality applications.

Table 2.5 Numbers of applications and success rates, 1999-2008

a) No. of

applications b) No. of awards unsuccessful c) No. of applications d) Application success rate, (b) as % of a)) By region: South East 1,068 524 544 49% Eastern 844 538 306 64% Greater London 717 341 376 48% South West 638 300 338 47% West Midlands 708 386 322 55% East Midlands 1,071 680 391 63%

Yorks & H'side 1,139 581 558 51%

North West 1,117 632 485 57% North East 352 233 119 66% By period: Apr99-Mar01 1,694 1,062 632 63% Apr01-Mar03 2,453 1,473 980 60% Apr03-Mar05 1,794 719 1,075 40% Apr05-Mar07 1,239 615 624 50% Apr07-Mar08 477 346 131 73% By type of award: Development 2,146 1,140 1,006 53% Exceptional 105 55 50 52% Research 3,967 2,285 1,682 58% Micro 1,439 735 704 51% By size of firm: Micro 5,692 3,037 2,655 53% Small 1,596 964 632 60% Medium 369 214 155 58% Total 7,656 4,215 3,441 55% Source: PACEC

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Table 2.6 Number of applications and success rates, 1999-2008 by sector

SIC Code Description

a) No. of

applications b) No. of awards

c) No. of unsuccessful applications d) Application success rate, (b) as % of a))

1-5 Farming, Forestry, Fishing 25 18 7 72%

10-14 Extraction (Oil, Gas) 94 45 49 48%

15/16 Man: food, drink, tobacco 79 61 18 77%

17-19 Man: textiles, leather, shoes, clothing 126 52 74 41% 20-22 Man: wood, paper; Publishing 114 62 52 54%

23-26 Chemical manufacture 662 418 244 63%

27-29 Metals & mechanical engineering 991 592 399 60%

30 Man: office machinery 388 224 164 58%

31 Man: electrical machinery 358 203 155 57%

32 Man: comms equip (radio, TV) 202 119 83 59% 33 Man: instruments (medical & other) 773 490 283 63%

34-35 Man: transport 233 109 124 47%

36-37 Man: Other (furniture, games, recycle) 213 97 116 46% 40,41,90 Electricity, gas, water, waste 62 32 30 52%

45 Construction 171 101 70 59%

50-52 Wholesale & Retail 235 134 101 57%

55 Hotels and Restaurants 9 7 2 78%

60-64 Transport, storage, comms 109 57 52 52%

65-67 Financial intermediation 10 4 6 40%

70-71 Property, renting 25 15 10 60%

72 Computing 1,215 539 676 44%

73 R&D 487 300 187 62%

74 Business services 658 325 333 49%

75 Public admin, defence 17 9 8 53%

80 Education 16 5 11 31% 85 Health, care 182 115 67 63% 91-99 Personal services 126 57 69 45% Unknown 77 25 52 32% Total 7,657 4,215 3,442 55% Source: PACEC

2.3 Market

penetration

2.3.1 Table 2.7 shows the number of award winners broken down by Division of the Standard Industrial Classification (SIC). The overall penetration was 0.17%. It reveals that awards have been made to firms from all parts of the industrial spectrum,

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pharmaceuticals). In conjunction with the previous table, it also indicates that 4,215 awards were made to 3,654 firms (i.e. 1.15 awards per firm).

Table 2.7 Sectoral breakdown of award winners and market penetration

SIC Code Description a) No. of award

winners '99-08 b) No. of Eng SME Establishments, 2007 (000s) c) Penetration rate (a) as % of b)

1-5 Farming, Forestry, Fishing 17 8 0.22%

10-14 Extraction (Oil, Gas) 43 2 2.66%

15/16 Man: food, drink, tobacco 53 7 0.77%

17-19 Man: textiles, leather, shoes, clothing 47 8 0.56%

20-22 Man: wood, paper; Publishing 56 36 0.16%

23-26 Chemical manufacture 334 15 2.16%

27-29 Metals & mechanical engineering 513 38 1.33%

30 Man: office machinery 206 1 14.72%

31 Man: electrical machinery 169 5 3.36%

32 Man: comms equip (radio, TV) 107 2 4.35%

33 Man: instruments (medical & other) 403 5 7.50%

34-35 Man: transport 100 5 1.90%

36-37 Man: Other (furniture, games, recycle) 89 17 0.54%

40,41,90 Electricity, gas, water, waste 28 6 0.45%

45 Construction 96 206 0.05%

50-52 Wholesale & Retail 114 429 0.03%

55 Hotels and Restaurants 7 142 0.00%

60-64 Transport, storage, comms 50 89 0.06%

65-67 Financial intermediation 4 46 0.01%

70-71 Property, renting 15 129 0.01%

72 Computing 489 108 0.45%

73 R&D 252 3 7.81%

74 Business services 278 436 0.06%

75 Public admin, defence 8 21 0.04%

80 Education 5 53 0.01%

85 Health, care 97 113 0.09%

91-99 Personal services 56 170 0.03%

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or are not comprehensive in terms of their sectoral coverage. The method of measuring penetration reflected in the Table, though not ideal, is the most satisfactory available.

2.3.3 Smart/GRD have not been targeted on sectors by the RDAs. It is open to different sectors with applications approved depending on the nature of ideas and their degree of innovation. It may indirectly attract businesses from specific sectors where the RDAs have a sectoral/cluster focus and this is the case with most RDAs although the number of sectors varies.

2.3.4 Table 2.8 shows the number of award winners and market penetration rates, broken down by region of the UK. The key feature of the table is that it indicates that market penetration rates for the scheme have tended not vary greatly from region to region. The exceptions are that market penetration rate in Greater London is just under a half of the national rate, whereas the rate in the East Midlands has been just over double the national rate. This probably reflects the fact that the per capita budget was lower in London (i.e. expenditure to the number of potential SMEs that could be supported) rather than the average sizes being significantly greater. Again, however, it is cautioned that the penetration rates shown are measured in a less-than-ideal way.

Table 2.8 Regional breakdown of award winners and market penetration

Region a) No. of awards

winners 1999-2008 b) No. of SME Establishments, 2007 (000s) (England) c) Penetration rate (a) as % of b)) South East 469 386 0.12% Eastern 471 241 0.20% Greater London 300 384 0.08% South West 254 219 0.12% West Midlands 347 203 0.17% East Midlands 568 166 0.34%

Yorkshire & Humberside 502 179 0.28%

North West 544 251 0.22%

North East 199 72 0.27%

All England 3,654 2,101 0.17%

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Panel 2.1 Summary of key findings

● In the evaluation period 1999/2000 to 2007/2008 the total expenditure on Smart/GRD was £239m (Table 2.1)

● The average size of awards in England was £399K (exceptional projects), £104k (development projects), £39k (research projects) and £14k (for micro projects). (Table 2.2)

● The share of expenditure by type of award for all the RDAs was similar to the national profile (Table 2.3)

● Just over 4,200 Smart and GRD awards were made, and there were twice as many Research awards as there were Development awards (Table 2.4). ● The numbers of applications peaked in 2001/03, whereas the success rate

bottomed out in 2003/05 (Table 2.5).

● Application success rates are lower amongst Micro firms (Table 2.5).

● Smart and GRD have involved firms in virtually all parts of the industrial spectrum by sector (Table 2.6), although market penetration rates have been uneven to some extent and varied considerably from sector to sector (Table 2.7). The higher penetration rates have been in electrical goods, R&D and chemicals. ● Overall the awards were more focussed on the mechanical engineering,

computing, instruments and chemicals sectors. In total these accounted for 48% of the 4125 awards with awards in other manufacturing and service sectors being relatively small.

● Market penetration rates do not vary greatly from region to region (Table 2.8). However, the rate in London is very much lower than the national average. This is mainly because the ratio of expenditure in London was lower compared to the total population of businesses

● During its lifetime, Smart/GRD has involved the equivalent of only 0.18% of all SMEs in England. This reflects the overall budget for grant and the sizes of the grants given (Table 2.8).

● These findings prevent the evaluation question (para.1.1.3), dealing with the extent to which the target audience indicated by the rationale for GRD/Smart is being reached, from being answered fully because of difficulties in defining the target audience quantitatively. However, in broad terms, they suggest that there is considerable scope to increase the market penetration of the scheme.

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3 Characteristics of Awards Made

3.1 Introduction

3.1.1 This chapter examines the characteristics of awards covered by the survey, including: amount of grant; the amount of grant relative to project cost; and year and duration of project. It then examines a range of award winners’ characteristics, including their: sector; region; size; status; age; growth objectives; and, innovativeness. This sort of information is useful later in the report in interpreting the effects of Smart/GRD awards on companies’ performance.

3.1.2 The chapter goes on to examine: award winners’ objectives in participating in the Smart/GRD schemes; and, whether they sought, were offered or used alternative or additional finance to enable them to undertake their projects. It then addresses the key evaluation issue of whether, and to what extent, projects supported were additional (i.e. would have gone ahead anyway without support). Lastly, it compares the key characteristics of unsuccessful applicants and their projects with those of the award winners.

3.1.3 The tables in this chapter show survey results first for all award winners combined, then broken down by type of award (micro, research and development/exceptional), company size (1-9 employees, 10-49 employees and 50+ employees) and scheme (Smart or GRD). All references to companies’ size is to their employment size at the start of their project, rather than currently.

3.2 Characteristics of the awards

3.2.1 Table 3.1 confirms that, by-and-large, the amount of grant offered in the case of Micro projects was less than the amount offered in the case of Research grants, which was less than the amount offered in the case of Development grants. It also shows that the amount of grant offered was broadly correlated with company size. More interestingly, it indicates that the large majority of Smart offers (82%) were for less than £45,000, whereas the majority of GRD offers (58%) were for more than this amount. This may partly be an inflationary effect in the more recent years of GRD but could be influenced by the maturity of the scheme and the willingness to commit higher levels of funds per grant.

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Table 3.1 Amount of grant offered (£k)

Type of grant Size of company Scheme Total Micro Resea

rch Devel/ excep 1-9 10-49 50+ Smart GRD 0 to 10 20 52 20 1 20 23 12 29 3 11 thru 20 9 45 1 2 12 1 0 2 24 21 thru 45 39 2 61 19 43 32 24 51 15 46 thru 75 15 0 15 23 14 16 10 7 31 76 thru 150 12 0 2 37 8 17 44 11 13 >150 5 0 0 17 3 10 10 0 14

Effective Sample Size 460 78 234 154 328 91 20 270 208

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 (q6aband)

3.2.2 Table 3.2 shows that, in the very large majority of cases, micro awards and development awards met less than half the project costs. However, the majority of feasibility awards met more than half the project costs. It also indicates that, the smaller the company, the greater the likelihood that the award met more than half the project costs. Overall, Smart awards were more likely than GRD awards to meet the majority of project costs; this despite the fact that (as Table 3.1 showed) GRD awards tended to be larger.

Table 3.2 Amount of grant offered as a percentage of total project cost

Type of grant Size of company Scheme Total Micro Feas/

resch Devel/ excep 1-9 10-49 50+ Smart GRD 0 to 30 22 13 6 58 16 33 61 22 21 31 to 50 37 71 29 34 36 40 29 33 46 51 to 75 38 12 61 5 43 26 10 43 28 76 to 100 3 4 4 2 4 1 0 2 5

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 (q6perc)

3.2.3 Table 3.3 indicates that just under half of the projects supported (48%) were started between 1999/2000 and 2001/02, and that feasibility projects were a feature of this period. Approaching one-third of the development projects were started in 2006/07,

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Table 3.3 Financial year in which Project started

resch Devel/ excep 1-9 10-49 50+ Smart GRD 99/00 9 1 10 11 7 14 19 13 0 00/01 21 20 24 15 21 20 28 31 0 01/02 18 14 20 15 18 19 20 27 1 02/03 18 15 21 12 19 14 16 27 0 03/04 5 13 3 4 5 5 6 1 11 04/05 7 12 6 6 8 3 0 1 19 05/06 4 5 3 6 5 4 0 0 13 06/07 10 12 6 17 10 11 4 0 30 07/08 6 7 3 10 6 5 6 0 17 08/09 3 1 3 4 3 4 0 0 8

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 (fy)

3.2.4 Table 3.4 shows that, overall, roughly one-third of projects took less than a year to complete and two-thirds took less than eighteen months. Unsurprisingly perhaps, half of micro projects took less than a year, whereas only one-third of feasibility projects and only 12% of development projects did so. Similarly, the duration of projects was fairly closely related to company size. Perhaps a more noteworthy finding is that the pattern of project length was similar for GRD projects to the pattern for Smart projects; this despite the fact that Table 3.1 and Table 3.2 together imply that the former were somewhat more costly.

Table 3.4 Project duration (Months)

resch Devel/ excep 1-9 10-49 50+ Smart GRD 1 to 5 8 19 8 2 9 7 0 9 5 6 to 11 22 33 25 10 24 20 6 24 17 12 to 17 37 31 42 29 37 35 53 35 41 18 to 23 14 10 13 21 16 12 9 14 15 24 to 35 9 4 5 21 8 7 23 8 13 36+ 9 3 7 18 7 18 9 10 8

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)

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3.3 Background of award winners

3.3.1 A little over half of the award winners were from four sectors (Table 3.5) including metals and mechanical engineering, R&D, instruments, and computing, and almost three-quarters were from just seven sectors. The table suggests that there were only minor variations in the sectoral distribution according to type of award, size of company and scheme.

Table 3.5 Company Sector

resch Devel/ excep

1-9 10-49 50+ Smart GRD

Metals & mechanical engineering 15 17 12 20 14 21 14 14 18

R&D 13 8 15 11 14 7 12 12 14

Man: instruments (medical & other) 12 9 14 12 13 13 3 13 12

Computing 11 15 9 11 13 6 0 8 16

Chemical manufacture 9 3 10 10 7 11 17 9 9

Man: electrical machinery 8 10 6 10 6 13 19 10 5

Business services 6 12 4 5 6 3 13 6 4

Health, care 5 3 5 5 5 4 0 3 8

Man: food, drink, tobacco 3 7 1 4 2 3 11 2 4

Man: transport 3 2 4 1 3 3 0 4 1

Construction 3 1 5 1 4 1 0 4 1

Farming, Forestry, Fishing 2 0 3 1 2 1 0 2 1

Man: office machinery 2 1 2 1 2 1 0 2 1

Man: comms equip (radio, TV) 2 3 1 3 2 0 8 2 1

Personal services 2 2 1 2 2 3 0 2 0

Man: textiles, leather, shoes, clothing 1 0 1 1 1 1 0 1 0

Man: Other (furniture, games, recycle) 1 2 1 1 1 1 4 1 1

Electricity, gas, water, waste 1 0 0 1 0 2 0 0 1

Wholesale & Retail 1 3 1 0 1 2 0 1 1

Transport, storage, comms 1 2 1 1 2 2 0 2 1

Extraction (Oil, Gas) 0 0 0 0 0 0 0 0 1

Man: wood, paper; Publishing 0 1 0 0 0 0 0 0 0

Property, renting 0 0 1 0 0 1 0 1 0

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awards. Small companies were evenly divided between applying for feasibility and development awards. Projects in the era of Smart were dominated by applications for feasibility awards, whereas projects in the GRD era were more evenly divided between micro, feasibility and development projects.

Table 3.6 Type of award applied for

resch Devel/ excep 1-9 10-49 50+ Smart GRD Feasibility / research 55 0 100 0 58 51 18 64 36 Development 27 0 0 97 19 47 79 22 38 Micro 17 100 0 0 23 0 0 14 25 Exceptional 1 0 0 3 0 2 3 0 2

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 (Q9)

3.3.3 Table 3.7 indicates that award winners were drawn from all regions of England, but it reveals no remarkable variations in the regional distribution according to type of award, size of company or scheme.

Table 3.7 Region of award winners

resch Devel/ excep 1-9 10-49 50+ Smart GRD South East 13 14 12 14 16 7 5 10 18 Eastern 14 8 15 15 13 20 15 13 16 Greater London 8 11 8 7 9 6 5 7 10 South West 7 14 6 7 8 4 11 8 6 West Midlands 10 5 12 7 10 10 15 11 7 East Midlands 16 12 20 12 16 18 11 18 12 Yorkshire / Humberside 14 15 12 15 11 24 19 14 13 North West 13 16 10 16 13 8 16 13 11 North East 5 5 5 6 5 5 3 4 7

3.3.4 Table 3.8 shows that three-quarters of all award winners had fewer than ten employees at the time they started their projects. Companies of this size dominated

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Table 3.8 Company size at start of project

resch Devel/ excep 1-9 10-49 50+ Smart GRD 0 to 4 59 82 64 36 79 0 0 58 62 5 to 9 16 18 15 16 21 0 0 15 16 10 to 24 14 1 14 21 0 67 0 14 14 25 to 49 7 0 5 15 0 33 0 7 6 50 to 249 4 0 1 13 0 0 100 6 2

3.3.5 Together, Table 3.9 and Table 3.10 suggest that a small proportion of companies migrated from the ‘independent business with no subsidiaries’ category to either the ‘not trading’ or ‘independent business with subsidiaries’ category (i.e. a few failed and a few spawned offshoots). Companies undertaking micro projects, those in the 1-9 employee size band and Smart award winners appear to have been the most likely to cease trading. Companies in the 10-49 and 50+ employee size bands appear most likely to have spawned subsidiaries.

Table 3.9 Which of the following best describes the status of your

business at the time the project started?

resch Devel/ excep

1-9 10-49 50+ Smart GRD

An independent business with no

subsidiaries 91 95 91 90 91 91 94 91 92

not trading / not yet a business 5 4 6 2 6 1 0 5 3

An independent business with

subsidiaries 3 1 1 6 1 6 5 2 4

a subsidiary of a UK owned business 1 0 0 1 1 1 0 0 1

joint venture 1 1 1 0 1 0 0 1 0

associated company 0 1 0 1 0 1 0 0 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 (Q12A1)

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Table 3.10 Which of the following best describes the status of your business now?

resch Devel/ excep

1-9 10-49 50+ Smart GRD

An independent business with no

subsidiaries 83 79 85 81 83 82 79 80 89

not trading / not yet a business 9 17 10 3 12 0 0 12 3

An independent business with

subsidiaries 5 4 3 8 3 9 11 4 6

a subsidiary of a UK owned business 2 0 1 4 1 3 0 2 1

a subsidiary of an overseas owned

business 1 0 1 2 0 3 9 1 1

associated company 1 1 0 2 1 2 0 1 1

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 (Q12A2)

3.3.6 Unsurprisingly, Table 3.11 indicates that, generally, the older the company, the larger it was. More significantly, it also indicates that Smart award winners tended to be older than GRD award winners, although this is presumably partly a function of the fact that the Smart scheme preceded the GRD scheme.

Table 3.11 (if a business) When did your business start trading?

resch Devel/ excep 1-9 10-49 50+ Smart GRD before 1980 11 3 10 18 4 26 39 13 6 1980 to 1989 13 15 12 14 10 23 35 18 5 1990 to 1999 34 29 37 30 35 36 18 42 18 2000 to 2003 26 32 29 17 32 9 3 24 32 2004 or later 15 20 11 20 19 6 5 4 39

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 (Q12cbnd)

3.3.7 Table 3.12 and Table 3.13 describe the growth ambitions of the award winners at the time their project started and now, respectively. The two tables have a number of interesting features, individually and in combination.

PACEC PACEC. Evaluation of Grant for Research and Development & Smart. Final Report URN 09/1059. A report prepared by. on behalf of DIUS / LDA

URN 09/1059

Evaluation of Grant for

Research and Development

& Smart

Final Report

PACEC

PACEC

The Evaluation Team

Contents

Executive Summary

X1 Introduction

X2

Background to Smart and GRD

X3 Principal

conclusions

X4

Other key findings on evaluation issues

X5 Methodology

1 Introduction

1.2

Background to SMART and GRD

1.4

Analysis of the business surveys

1.5

Structure of the report

2

Take up and market penetration of the GRD scheme

2.1 Introduction

The Delivery of GRD and Expenditure

2.2

Number of awards and application success rates

2.3 Market

penetration

3

Characteristics of Awards Made

3.1 Introduction

3.2

Characteristics of the awards

3.3

Background of award winners