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Policy instruments


Policy instruments are interventions made by government/public authorities in local, national or international economies which are intended to achieve outcomes which conform to the objectives of public policy. They can take many forms, ranging from regulatory régimes to the provision of services to help improve the performance of businesses.

Written by Christian Saublens

Reviewed by David Walburn

 

The concept

How to implement it?

Step in the RIS process

What can be expected?

A quote

References

Experts' comments

 

The concept


Instruments to support businesses can take many forms, for example :

  • Provision of infrastructure such as real estate to accommodate businesses, laboratories and business incubators, and high speed broadband
  • Provision of expert coaching to support the management of small businesses
  • Programmes to address the financial needs of businesses, including grants and more sophisticated investment instruments
  • Provision of technical support to businesses
  • Developing and supporting the means by which businesses can work together through clustering and other networks, creating social capital in the business community
  • Provision of particular expertise to businesses to assist with, for example,  forecasting, technical development of new product ideas and developing international business
  • Provision of demonstration facilities to better enable firms to develop, test and market their products
  • Programmes to help small firms market innovative products, including public procurement
  • Setting up specialist agencies to attract foreign direct investment in existing  businesses or to set up new operations.

These support measures can be classified as direct support, usually of a financial nature for firms, or indirect support through the provision of services. Experience suggests that a combination of the two types has a greater impact than the use of just a single instrument. 

Some support services provide more added value than others. From the low knowledge intensity to the highest added value, they can range from providing information, raising awareness, acting as a  coordinator / catalyst, offering accommodation in real estate / resorts; facilitate matching / interfaces between stakeholders, supporting the assessment of the business' strengths, providing intelligence / knowledge, giving advice, offering training, forging partnerships, supporting the first client search, facilitating transfer and brokerage, to investing in financial engineering tools.

Examples of policy instruments: domain

DIRECT

INDIRECT

Grants

Clusters

Loans

Incubators

Reimbursable advance

Research centres

Equity

Technology centres

Guarantees

Demo centres

Proof of concept

Living labs

Market replication

Fablabs

Pre-commercial procurement

Coaching/mentoring

Tax holidays

Technology transfer

 

Market intelligence

 

Foresight

 

Talent attraction

 

How to implement it?


Public authorities can provide grants, guarantees or revolving funding sources. They can apply different forms of public calls or put in place a voucher scheme. They can provide a 100 % of the eligible cost or ask the beneficiary to co-fund part of the project.

A good way to apply the concept is to design support services to SMEs, combining financial and non-financial instruments. For instance grants and coaching; investment readiness and equity finance; mentoring and export support; grants for innovative projects and management capability or recruitment of PhD students.

Regions often face the dilemma of "picking the winners" vs "supporting the winners". Therefore some regions are currently providing added value support services through cluster initiatives and others through a portfolio of strategic enterprises for the region.

 

Step in the RIS process


Step 5: definition of coherent policy-mix roadmaps and action plans

 

What can be expected?


  •  Addressing market failures (access to external funding sources, innovation in SMEs, …);
  • Improved management capacity in SMEs;
  • Eliminate the asymmetry of information between stakeholders;
  • Enhance cooperation between enterprises or between enterprises and other stakeholders;
  • Speed up enterprises' take up of new business attitudes (R&D+I, internationalization, networking, technology transfer, …).

 

A quote


"Although much of enterprise and innovation support is delivered through grants, there are early indications that loans are more effective than grants. There are also signs of the effectiveness of non-financial, "soft" support such as business advice. There are also some hints that combining financial and non-financial support in one package contributes to impact." [1] - DG Regio

 

References


-          DG Regio: Regional Focus, February 2012: "What are counter factual impact evaluations teaching us about enterprise and innovation support?"

-          EURADA: All money is not the same

-          PRO INNO EUROPE: Making public support for innovation in the EU more effective

 

Mr Christian Saublens


 

Christian Saublens has more than 30 years of working experience in European trade organizations. Since 1992 he is the Executive Manager of EURADA, the European Association of Development Agencies, a network of 145 organisations. Christian has been involved in the organization of numerous conferences and meetings dealing with all matters related to regional development. He wrote several papers and working documents on business support schemes for SMEs. He played an important role for the dissemination in European regions of concepts such as benchmarking, business angels, investment readiness, proof of concept, clusters, open innovation, financial engineering, crowdfunding, … Several times Christian has been appointed as an expert by the European Commission and the Committee of the Regions.

christian.saublens@eurada.org

 

Experts' comments


Policy instruments are the means by which public policy is put into practical effect, In theory we might expect politicians to decide on the policy, with officials and practitioners devising the means of its implementation. In practice these two areas may be confused. For example, politicians may introduce all sorts of ideas for instruments, and have a commitment to them which takes inadequate account of either their effectiveness or the appropriateness of the underlying policy to current conditions.

It is therefore always important to assess – and keep assessing – policy instruments to try to ensure that they are fit for purpose. What is the evidence base for their effectiveness ? Are there adequate means of measuring this effectiveness ? Are there other, more effective, or more efficient means of achieving the same policy objective?

There is a danger that mainstream policy instruments which seem effective in one region or country may be adopted widely with inadequate consideration being given to whether they might be effective somewhere else. Once instruments are in place there will be always a group of people, who have been responsible for devising them, to rise to their defence, even if the evidence of success is limited. 

The instruments highlighted in this article, therefore, should not be seen as a menu of tools to be deployed indescrimately, in any jurisdiction. Too often regional policy demands a certain representative selection of instruments simply as a sign that economic development is being taken seriously. There is danger here, as the spending of public money on less than effective instruments brings economic development pomicy into disrepute, and thus subject to cuts when resources are limited – as during the current period.   

 

Mr David Walburn


After a career in business David Walburn joined Greater London Enterprise in 1986 where he was responsible for venture capital and other small business support, before becoming Chief Executive of the organisation. He was the Chair of the London Business Angels Network and played a key role in the setting up of the European Business Angels Network. He has worked with the UK government and the European Commission on developing public policy initiatives to improve the financing of small and medium-sized enterprises. He was the Chair of Capital Enterprise, the umbrella body for organisations supporting micro business development in London, until 2012.

For the last ten years he has been a Visiting Professor at London South Bank University where he headed the Local Economy Policy Unit and was the managing editor of the journal Local Economy.

He has served as President of EURADA, and been a member of a number of advisory bodies of the European Commission.  He has been an active member of the International Economic Development Council in Washington DC and has a wide range of international contacts with economic development organisations.

He continues to write and lecture on small business finance and regional economic development.

davidwalburn@london.com



[1] Regional Focus, February 2012: "What are counter factual impact evaluations teaching us about enterprise and innovation support?"

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