Framework RTD programs and SMEs

Some comments on EU policies related to innovation and SMEs1

It is nowadays more than obvious that the RTD framework programs FP6 and, especially FP7,  were designed under the pressure and consultation of powerful consortia which set the rules so that they monopolize the EU funding. It also fitted to the capabilities and structure of DGResearch: fewer proposals, less work.

However, this setup is far from serving innovation and competitiveness of European industry and especially SMEs. Here are some reasons why:

  • The "integrated projects of substantial size and aim" and the "virtual centres of excellence" offer poor service not only to manufacturing SMEs but to the industry as a whole. Programs asking for large scale inhomogeneous consortia, with huge budgets, pursuing long term vague objectives are of no help to innovation and competitiveness.
  • The concentration of funding to "thematic priorities" excludes vital manufacturing activities. The importance of some thematic priorities is overemphasized. Applicants are forced to disguise their proposals and R&D interests so that they fit into thematic priorities.
  • DG RTD is systematically trying to attract very big industry applicants. But big industries have enough funds to pursue their RTD alone or through outsourcing, without the need to share know-how and RTD results with a multitude of other partners. Of course they welcome the free money when offered by DG RTD.
  • The projects with a multitude of partners (about 10 in the past and more than 50 now) become even more useless for industry when coordinated by academic partners. In most projects the most apparent results are publications in scientific journals.
  • The cost of the few practical innovations developed is 10 to 100 times more of the budget spent for similar innovations created in private laboratories.
  • The desired and highly advertised interaction among partners has become negligible.
  • The CRAFT program (supposedly tailor made for SMEs), limits SMEs to the role of pathetic innovation receivers, which "outsource" the solution of their problem to "research performers", that is research centres or academic laboratories. In this way the participating SME will never be induced to the innovation culture and will never play the role of innovation performer. And this is what is missing from the average European SME as compared to the corresponding US company.

Conclusions and recommendations

A completely new approach of funding SME innovation is needed. We must all work for the better use of EU funds so that European industry, both large and SME, be more competitive. It is a naïve and unrealistic approach to believe that breakthrough technologies will appear as a miracle just because enough funding is made available to the "centres of excellence". This "visionary" approach is not going to help the competitiveness of European industry.

What is really needed is to induce the innovation culture to more and more European industries and especially the SMEs. Innovative industrial companies are the ones who can transform basic research into products with important or incremental improvements. Research institutes and academic laboratories will play a supportive role but can never be the leaders. Only in such an environment we might expect from time to time the emerging of a breakthrough technology.

I strongly recommend everyone to go to an excellent text produced by the commission:

"EURAB report on SMEs and ERA, Report and recommendations ( EURAB 04.028)". The only basic and sharp objection I have to these recommendations is related to CRAFT program. EU must not pour more money to CRAFT before changing completely its operation philosophy.

My opinion is that CRAFT should incorporate elements from the, very successful, US SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) programs, before thinking of any budget's increase. CRAFT must become the tool of inducing to the European SMEs the spirit and the culture of innovation. There is an Addendum to this paper with basic information on SBIR and STTR taken from the corresponding website. By reading this information you will realize the extreme deference, in concept and application, to the existing EU programs. (Collective research, Co-operative research).

It should be noted though that the US practices of fostering innovation among SMEs are not limited to State or Federal authorities. Large corporations have found that the funding of specific innovation projects of SMEs is an excellent investment. What are asking in return is that they will be the lead customers of the products or services developed.

Evaluation procedures.

The present evaluation procedure is unfair (short evaluation time devoted per proposal, and, many times, by unqualified evaluators). Moreover, the commission cannot attract evaluators working in private sector because very few could meet the duration requirements set. The result is that evaluation of industrial proposals is mainly done by academics or self employed consultants. I propose these alternatives:

  1. Sending the proposals for evaluation to well qualified evaluators who have signed a secrecy agreement.
  2. Dividing proposals into several thematic categories and organize short duration (2-3 days) separate evaluation sessions for each category.
  3. Outsource evaluation to organizations (members of the innovation network? others?) which must be closely monitored by the Commission. Each of these evaluating organizations should be accredited according to standards set by the Commission. The accreditation should be immediately suspended by the Commission in case of irresponsible acts.

The argument that sending proposals out of the Commission's buildings endangers secrecy and leakage of vital information can be offset by the following:

  1. Same danger exists when sending a paper for peer review and publication to a scientific journal.
  2. The same (or even more) danger exists when applying to a bank for financing of a new venture.
  3. In a consortium of several partners, not any individual partner would disclose really critical information. For example, my company (Argo SA), is 100% self funding any innovation project which is of vital and imminent commercial interest (rather than applying for EU or national funding within a consortium).

Differences in size and duration between academic R&D and innovation proposals.

Industrial innovation proposals applying for EU funding are generally under-funded if we take into account the deliverables they promise, but over-funded if we account for what they actually deliver at the end. The larger the size of the consortium and its budget, the more extreme is the situation. The big mistake of the Commission, especially in FP6 is that was asking for bigger and bigger consortia with larger and larger budgets. This created the monsters we see today, absorbing huge amounts of available funds, and delivering a very small fraction of what the promised.

The part asking for the description of "commercial exploitation of the project deliverables" in both the proposal and the final report stages could be considered rather as a joke (in a consortium of 15 or 50 participants). Actually, the project coordinators spend a lot of time trying to create the required text of minimum 15,000 characters. There are always exceptions of course.

Innovation projects must be very accurately targeted and of small duration (1-2 years). There must be a limited number of partners. In many cases two are enough. Accordingly, the budgets should be adjusted to the specific target and to the small partnership. The yes-or-no answer of the Commission should be given in a very short time. Timing is vital to any innovation. Need for a straightforward funding of academic research: How to limit the creation and dominance of academic yuppies.

In contrast to the short term, targeted projects, an academic R&D project should have the duration of at least the time needed for the completion of a Ph.D. And of course developments in basic research, involving concerted efforts of Community institutions might require still longer time-scale. Academics are far away from market and user. So, they cannot be innovators (with exceptions of course). But they have been forced by the present EU research funding criteria to fake the "innovators".

In my long life I met academics in many countries of the world doing excellent research with very limited budgets; and fortunately I still meet them. However, the policy of European Union towards funding of academic institutions has created a new species which I named (as early as 1985) Academic Yappy. Is the person who bases his academic career on how much EU money he brought and not on what he did with that money.

1At the end of 2009, interested stakeholders were invited to submit comments on the EU innovation policy. This paper contains the author's comments. The results of thisconsultation have been made publicly available on

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