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URN No: 95/637
SUMMARY
The United Kingdom has participated in the EUREKA programme from its inception in 1985. During 1992/93 an international evaluation of the industrial and economic effects of EUREKA was carried out under the French Chair, the results of which have now been published. This report describes the findings of an evaluation of the implementation, impact and appropriateness of the scheme as operated in the United Kingdom. It also discusses the implications for the scheme of recent policy changes following the publication of the White Paper, 'Realising our Potential'.
The evaluation focused upon the achievement of the objectives of EUREKA as laid out in the Hannover declaration in 1985. These may be summarised as aiming to raise the productivity and competitiveness of Europe's industries through co-operation in projects in advanced technologies with worldwide market potential.
As with the international study, the evaluation is based upon three levels of information:
- Compilation of data on characteristics of projects and participants;
- A questionnaire survey to participants addressing effects. 114 responses were received, the response rate being 48% for industrial participants;
- In-depth interviews with a representative sample of 25 projects with UK participation. For 16 of these, non-UK participants were also interviewed.
Projects and participants from the United Kingdom had the following characteristics:
- The UK participated in 113 projects within the time-frame of this study: 26% of all EUREKA projects. Of these, 103 were of the 'standard' and 'sub-umbrella' types addressed by this evaluation.
- UK participants were the main partner for 33 projects. These had a total value of 420 MECU and an average of 9.8 participants.
- Among the technical areas of EUREKA, the greatest number of UK participants were in 'Robotics' projects (21), followed by 'Biotechnology' (15) ,'Information Technology' (14) and 'Environment'(13).
- Survey responses from industry comprised 58% from SMEs (fewer than 500 employees) and 42% from large firms. Non-industrial participants comprised 64% universities, 12% private research institutes, 12% research institutions with mixed funding, 9% public research institutions and 3% others. University participation was almost twice as frequent in the UK as in the international sample.
- France was by far the UK's most frequent partner, being involved in almost half of the UK's projects. 41% of all partnerships were with other UK organisations, indicating that EUREKA is an important instrument of national collaboration (though in a wider international grouping).
The report examines the way in which EUREKA is implemented in the United Kingdom, covering the activities of EUREKA Unit, promotion of the programme, application and selection procedures and funding policies. Points emerging include:
- There is a need to distinguish between the granting of EUREKA status and decisions on whether to give funding support. On the latter, EUREKA accounted for 30-40% of commitments and 17% of spend in DTI's Innovation Budget in 1992. However, following recent policy changes, this level is likely to be reduced considerably.
- Under the old regime, despite the overall 'bottom-up' ethos there could be priorities reflected into the scheme depending upon the availability of funds for a particular area.
- The time taken for a proposal to progress from initial contact to issue of a grant was on average 12-15 months. This delay was primarily caused by the time taken for financial assessment of firms, including the time taken by firms to produce the required information.
- The new and far more restrictive criteria for funding have led to a strategy of encouraging more firms to participate without funding. This year significant numbers of participants of this type have been obtained However, the indications are that this level is caused by applications generated through earlier promotional activity under the former regime remaining in the system, though often at a reduced level of activity.
- Monitoring is currently associated with funding. Non-funded projects with EUREKA status usually lose contact with DTI altogether.
- Other Government departments have offered little or no support for EUREKA projects. However, to the extent that they do, they are not bound by DTI's new funding rules, thus creating the potential to confuse would-be applicants.
A key characteristic of EUREKA is that it requires collaboration. In this section the relationships of the projects to the strategies of the participants and the dynamics involved in collaboration are investigated.
- EUREKA projects are primarily undertaken in areas yielding a potential new core technology for the participant. This was particularly the case for SMEs (58%). Smaller firms were generally less likely to be working on more peripheral areas, while large firms were more likely to enter collaborative projects to develop longer term or more speculative technologies. SMEs were likely to be using EUREKA for important strategic transitions into new technologies, thus leaving them vulnerable to project failure.
- The dependence of EUREKA projects upon advanced technology was reflected in the most popular location of projects being central R&D laboratories. SMEs also frequently located projects in production units (35%). Other parts of the organisation were often involved.
- EUREKA projects were more likely than EC projects to be 'stand-alone' activities in the firm, reflecting the fact that the scheme is often used for diversification and development of potential new technologies. On the other hand, in a significant number of cases they were integrated with work supported from other sources.
- UK participants were more prone than average to change their strategy or to experience changes in project participation. SMEs were particularly vulnerable to changes in strategy by their partners.
- Most partnerships are based on previous links, with 30% based on business links and 27% on research links. Only 5% of these represented a continuation of a relationship forged in an EC-funded project.
- The dominant motivation for collaboration is access to complementary technical expertise. Industrial respondents also rated sharing of costs and asks and acceleration of the time to market as important. Partnerships with direct competitors were relatively rare. Large fines worked most frequently with indirect competitors (48%) while SMEs most frequently co-operated with their customers (27%). Where competitors did work together, it was usually in long-term strategic infrastructure-building or standards projects.
- UK firms of all sizes were significantly less likely than the international average to have the role of integrators or systems developers in projects. Large firms often had the role of prospective users (50%) and non-industrial organisations that of research consultants (45%).
- More generally the role of users in product-oriented projects is an important feature of EUREKA. Some projects involved participants active in all stages of the supply chain, while others were based on customer supplier relations (usually between a large user and an SME supplier).
- A range of structures exist for managing projects including 'star-structures', modular and integrated projects. Around 90% of firms reported that partners were significant or critical to achievement of project results and almost as many for exploiting them, indicating that collaboration in EUREKA is genuine.
- Barriers to achievement of objectives included technical problems, funding difficulties, inadequate project management, incompatible company strategies, delays or non-delivery by partners, changes in ownership of partners and legislative or market changes.
- Success factors lay in the alignment of partner objectives, strict management of conflicting commercial interests, development of good communication and interpersonal relations, clear objectives and task allocation and adequate support from firms' senior management.
The intended effects of EUREKA on productivity and competitiveness were assessed through examination of the actual outputs of the projects, the markets addressed by them, and the effects achieved so far. With projects mainly still in progress, some reliance had to be placed upon projections. Data collection was structured according to a view of competitiveness which encompasses assessment of knowledge and skills gained as well as artefacts produced.
- 70% of participants believed they had improved their technical standing in world terms, while hardly any conceded that they had lost ground during their project
- 81% of UK respondents expect to product a new and/or improved product or process, with 32% having already achieved this objective. High levels were also recorded for outputs which represent significant gains to knowledge (eg. publications) and intermediate technological outputs such as prototypes. The majority expected products or processes to be realised within 3 years.
- UK firms are on average starting from an initially weaker domestic market position than those in the international sample as a whole. About half aimed at initial exploitation in European markets with the remainder adding global markets from the outset. SMEs were often aiming at niche markets.
- 35% of respondents expected at least moderate sales increases arising from their project, with a similar number expecting improvements in market share. Reductions in production cost were expected by 25%. Effects on employment (6%) and company start-ups (4%) were rare.
- Process benefits were realised more quickly than sales of products, with 30% of those expecting than having already achieved them. Sales and market share benefits were usually expected in the short to medium term (75% of sales effects accomplished or expected within 3 years).
- In contrast with the findings of the international evaluation, where SMEs generally performed better than large firms, there was no clear distinction in the UK. The main barriers to progress for the UK SMEs were funding and regulatory problems and a lack of well-developed networks.
- There was a clear relationship between the importance of the technology to the firm and expected sales and market share. Over 50% of respondents working within their existing core technology expect overall sales or market share to be significantly enhanced. A similar finding applied to business strategy - firms staying within their core businesses registered the greatest effects.
- Indirect effects on participants were also significant. These included acquisition of networks and of technological and business competencies.
The concern of EUREKA with advanced technology caused many firms to seek access to external sources of knowledge held in universities and research institutions. As might be expected, these participants emphasised more strongly the knowledge and skills generated.
- PhDs were a frequent output (51%). A quarter of non-industrial project personnel subsequently moved into industrial employment. Intermediate outputs such as prototypes were more common than for industry. A spin-off benefit was the opportunity to acquire improved research methods and facilities.
- Some sought to commercialise their activities themselves but these efforts were not usually successful. Most benefited primarily through acquisition of capabilities which enhanced their capacity to perform research - their main business.
Benefits were not necessarily confined to those taking part. About four-fifths of EUREKA projects with UK involvement were of significance more broadly than for the firms concerned alone, a higher figure than the two-thirds in the international sample.
- Benefits towards areas such as the environment, health or energy were generally achieved as a consequence of the firm's commercial objectives rather than through social motivation alone.
- Generic technologies, notably in manufacturing, yielded spill-over benefits to a wide range of sectors.
The impact and additionality of EUREKA as a scheme were assessed, with issues including significance of financial support, non-financial benefits, and the role of the EUREKA framework.
- As in the international survey, 18% of industrial respondents had no public funding. However, the international study revealed that only a maximum of 5% of projects received no funds for any partner.
- 42% of industrial respondents would not have done the project without public funding, while 16% would have done it anyway. The remainder would have done the work differently: more slowly, on a smaller scale or with different objectives. Interviewees stressed the high costs of international collaboration and the importance of an external award in securing internal commitment as their main reasons for requiring funding. The only project where no participant from any country was funded which could be identified was proceeding at a low level of activity due to lack of funds.
- For SMEs prestige was a significant non-financial benefit though large firms appeared less enthusiastic about this aspect.
- On the scheme as a whole, the flexibility of EUREKA in enabling nearer-market activity in non-prescribed technological areas (in comparison with EC R&D) was noted by participants. The greatest problem cited was the effect of delays in funding decisions for partners and general asynchronicity between countries in granting funding.
- Nonetheless, overall UK participants concurred with the international sample in giving EUREKA a positive rating (77% positive for large firms, 85% for SMEs and 100% for non-industrial organisations). These ratings are more positive than for UK industrial participants in EC programmes (67% positive).
This national evaluation performed in an international context reflects the United Kingdom's 'national system of innovation', including support for innovation, availability of investment, academic-industrial relations and the quality of training.
The main findings of the evaluation are summarised above and are also presented in the first part of the conclusion to this report.
The international report identified a number of lessons for participants and governments, all of which are of relevance to the United Kingdom. These are not repeated in this report, which instead concludes with a discussion of the implications of the evaluation findings for the implementation of recent policy changes in the United Kingdom, both as generally reflected in the White Paper and with specific reference to EUREKA.
The evaluation indicates that funding is important and consequently we conclude that the reduced scope and level of funding available in future is likely to have a major impact upon the quantity and quality of applications. The high level of applications proceeding without funding this year will probably emerge as an aberration resulting from a momentum achieved before the rule changes were announced. The indications are that several of those who have not withdrawn will proceed at lower levels of activity, bearing out the findings on additionality. A typical non-funded project is more likely to focus upon information exchange than R&D.
Accepting this situation, how can benefits for non-funded participants be maximised? One of these benefits has been the prestige associated with EUREKA status. It is a matter of concern that UK participants consider this to be lower here than else where and there may be a case for a marketing campaign with the specific objective of raising prestige. More importantly, granting of EUREKA status must be seen to reflect the fact that projects fulfil certain criteria. For example, an endorsement from DTI may help an SME attract venture capital for its project. The difficulty here is that in the past EUREKA status has been in effect a checklist process, while approval for funding has involved a much more rigorous appraisal procedure within DTI. To transfer prestige to EUREKA status there must be a real appraisal procedure which, while not unduly burdensome upon firms, should result in an approval which implies a technical and financial endorsement of the viability of the project (within the normal risk parameters associated with this type of R&D). An analogue would be the Queen's Award scheme.
It has always been an intention of EUREKA that participants should benefit from so-called "supportive measures", whereby Government offers assistance in negotiating relevant regulations and standards, and perhaps in obtaining venture capital. Such measures have been primarily distinguished by their absence both in the UK and else where. In the light of new DTI policy, a concerted effort to provide this type of assistance to projects would make EUREKA status without funding more attractive and funding more effective. The project officer role would become that of an "uncle" in Government available to help the project in its dealings with the public sector. This role would demand expertise beyond that of a technical project officer, and would probably involve liaison with other parts of DTI and with other Government Departments. At a minimum, training and new guidelines would be necessary.
Both the "uncle" role and the appraisal activity would have staff resource implications at a time when numbers are reducing.
The evidence that projects pursuing commercial benefits may nonetheless yield social benefits in areas such as the environment, health and safety suggest that EUREKA offers an appropriate mechanism to pursue the White Paper objective of encouraging other Government Departments to pursue the scope for industrial benefits in the course of supporting their original missions. Their minimal support for EUREKA to date needs to be substantially upgraded.
Looking at wider benefits achievable through spill-overs, there is a good case for giving increased priority to funding for projects which have the potential to yield broader benefits through the production of generic technologies. This would provide a good instance of a situation in which to depart from the general funding principles. EUREKA remains fundamentally a technology generation scheme. The UK alone cannot convert it to a diffusion programme but such technologies do have inbuilt potential for driving their own diffusion.
Public schemes can founder upon the rules they erect for themselves. Without departing from the spirit of the new funding regulations, it should be recognised that circumstances will emerge when the practice should be different. One example is given above, another is the situation where SMEs require the participation of a large firm as user but the user gains little individual benefit. This provides a strong rationale for funding the lead user. Sweden, having formerly funded only SMEs, has moved to this model in the light of its experiences of inflexibility.
Finally, non-industrial organisations have clearly been making a valuable contribution to EUREKA and continuing provision needs to be made for support for their participation. To the extent that this is not available, other organisations such as the Research Councils, in the light of their new missions, should be encouraged to support such participation.
