Companies|According to the researcher, R&D subsidies should be targeted better than at present. Now among the recipients of subsidies are companies that should not be given any more subsidies.
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R&D subsidies are being increased in Finland, but their allocation is problematic.
Subsidies can also go to poorly productive companies and prolong their survival.
It is important to finance projects, the new technology or knowledge produced by other companies can also be used.
Small companies can often benefit from R&D subsidies more than large companies.
Support funding should be directed more to the private service sector and not to industry.
For research and development subsidies are being increased in Finland, but there is a risk that the funding will not achieve the desired benefits. Support money can also go to waste.
“We already have strong research evidence that some of the R&D subsidies are wasted, i.e. directed to areas where there is no increase in productivity,” says the research director of the Institute for Economic Research, Etla Heli Koski.
It is productivity growth through research and development (R&D) that is aimed at, because it is a key factor in economic growth.
Koski emphasizes that R&D subsidies are in themselves the best form of subsidies, if they were directed to the right targets. According to Koski, the allocation of subsidies should be made more efficient.
Etla Research Director Heli Koski.
According to Koski, the wrong recipients of subsidies are poorly productive companies whose survival is prolonged with the help of subsidies. Otherwise, such companies would be leaving the market. The problem is that they tie up resources, i.e. labor, which could be used in more productive companies.
“Such aid recipients should be removed from the list of aid recipients, and no more aid money should be poured into them,” says Koski.
According to Koske, instead of such companies, the grant money should be put into companies that carry out research and development projects in cooperation with other companies or research institutes.
Koski reminds that the productivity growth of individual companies alone is not enough to save Finland, but the aim of the subsidies is to finance projects that produce new technology or knowledge that can be used more widely in society.
“At this time, the projects receiving support have social value. Only such innovations can be seen as an increase in productivity,” says Koski.
Others too there are problems with the distribution of subsidies.
One big problem, according to Koski, is that R&D subsidies in Finland are largely aimed at industrial companies. However, this does not solve the problem of Finland’s weak productivity growth, because industrial companies are already at a good level in terms of productivity in an international comparison.
Instead of industry, Finland’s problem is the low productivity of private services, . It should be improved, because it weighs on the productivity figures of the whole of Finland.
Private services with the greatest productivity growth potential are various digital services.
“The focus of the subsidies could be changed somewhat towards the service sector, and we should especially think about ways to increase innovations in the service sector related to digitization and the utilization of data,” says Koski.
Koski also sees problems in the regional distribution of subsidies. Now the subsidies are very fragmented across the country. According to Koski, subsidies should not be used as instruments of regional policy.
According to studies, the relative benefits are greater when the subsidies end up in centers of expertise with a lot of researchers, companies and universities, Koski emphasizes.
Straight in addition to financial support, R&D activities are supported with tax deductions. The tax deduction available to companies last year was increased this year.
According to Koski, the problem is that large companies can now get R&D tax breaks without increasing their R&D investments at all.
“The current tax model enables larger companies engaged in R&D activities to receive tax relief of half a million euros annually for research and development activities that they would do even without subsidies,” Koski points out.
There are more than 200 such companies.
In Koske’s opinion, the tax reductions should have been aimed only at small and medium-sized companies.
According to him, studies from around the world show that tax subsidies clearly increase the R&D investments of small companies more than large ones. For small businesses, the tax advantage also brings important predictability.
Why subsidies are distributed to the wrong companies?
Koskä has a view of how Business Finland, which distributes subsidies, should act when distributing subsidies.
“The decision-makers never have complete information about a company’s ability to innovate, but there is, for example, information on whether the company applying for support has previously been able to produce new products and how much,” says Koski.
He points out that, especially when the company applying for support is an old company, there is plenty of information about it.
“At least a basic revision could be made so that subsidies would not be given to old companies whose productivity has been low for years,” says Koski.
This could be easily verified by looking at the level of productivity of the beneficiary and whether it has increased, i.e. how much added value the company has produced per hour of work done by the employee.
Of course, Koski admits that the grantor cannot know in advance whether a development project will result in a product that brings sales and turnover and increases productivity. The company itself doesn’t know that, projects are always risks.
However, the aid distribution errors that continue from year to year could be partly avoidable.
Also Leading researcher of the State Economic Research Center (Vatt). Elias Einiö estimates that there is much room for improvement in the allocation of R&D subsidies.
However, according to him, the matter has not been studied enough to be able to draw strong conclusions about whether the subsidies hit the right targets.
“So far, we can say that the subsidies can have positive effects on average, but we don’t know if they are targeted in the best possible way,” says Einiö.
According to him, it would be important for the allocation of subsidies to be studied systematically, using scientific methods. It is especially important for him now, when the allocation of subsidies is increased, so that taxpayers get the best possible benefit from the subsidies, that is, that genuine new innovations arise.
“The birth of innovations is the first condition for support to be beneficial for society. In addition, it would be important that, with the help of subsidies, it would be possible to generate new knowledge that would also be useful to others than the company itself,” says Einiö.
Einiö emphasizes that, in principle, supporting R&D activities is justified, because without subsidies, companies do too little research and product development.
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