Volume 8, Number 1 – February 2011

The Promise of Innovation Vouchers

As Federal, state, and local economic development entities face tough budget challenges, they need to find ways to “do more with less.”  Many agencies express a commitment to partnering with the private sector, but they regularly miss good opportunities to capitalize on the talents of these potential partners.  This is especially the case when we look at the provision of technical assistance and other services to small and medium-sized businesses.   Management and staff at Small Business Development Centers, microenterprise organizations, and other business support groups regularly (and correctly) complain that they are “swamped” with work.  They have too many customers and cannot devote the needed time and attention to many deserving businesses and aspiring entrepreneurs. 

When asked for solutions to this challenge, business service providers plead for more money.  While I personally agree that more funds should be provided, that’s not a likely scenario in the current budget environment.   Other strategies are needed.
One promising model—the innovation voucher– is already being used overseas on a regular basis.  Innovation vouchers operate via a fairly simple process.   A small business receives a voucher, generally backed with public funds that it can cash in with pre-approved consultants or research centers who help the firm address a pressing technical or business issue.  

Each voucher has a relatively low value (e.g. below $10,000), and the process for receiving vouchers is fairly simple.  Firms must file a short application, and describe their intended activities.   In cases where larger dollar amounts are expended, so form of matching investments are often required. 

Innovation voucher programs have become hugely popular in Europe where there are at least 25 different programs underway.   The concept was first tested in 2000 in the Netherlands and now has spread throughout Europe.  In September 2010, the European Union announced the Riga Declaration which sets out guidance for the expansion of innovation voucher programs across the region.   More recently, numerous other governments, including Singapore, Taiwan, and Alberta, have announced their own voucher programs.

 A 2009 evaluation of European innovation voucher programs found that most of the programs are still very new.   Vouchers could typically be used for wide variety of activities, including research and development, product development, management consulting, and training.  This diversity of uses is a real added benefit of the voucher system.  They allow businesses to obtain support services specifically tailored to their most pressing needs.  

Early evaluations of these projects are quite positive.  The voucher programs are quite popular, but, even more importantly, they are generating bottom line benefits—in the form of new business and new jobs—for business customers.  The programs also seem to generate a host of other spin-off benefits, such as:

• Programs are more flexible, allowing firms to tackle a host of different issues and problems.
• The use of vouchers helps create a stronger base of local consultants and business service providers.
• The vouchers encourage firms to get more involved in local business support networks.
• The system can operate with limited funds and administrative capacity.

This positive early experience with innovation vouchers in Europe has reached a point where the use of vouchers is now considered a regular “best practice” for business support within the EU.  They offer a tool to provide a wide variety of support services at a relatively low cost. 

As a US-based economic developer, the real mystery to me is why this model has not taken hold here at home.  It is ideally suited to the US system where we have limited public dollars to fund programs or personnel, yet we are also home to a highly-skilled marketplace of private consultants and non-profit business service providers.  Voucher programs have been used for business training purposes.  Why not use them for business innovation support as well?   Let’s hope that this concept will soon be imported here to the US. 

What’s New at EntreWorks Consulting?

We continue to provide more regular news and updates at the EntreWorks blog (http://blog.entreworks.net).  Recent postings have focused on the 2011 Capitol Hill outlook, the new movement to turn redfields into greenfields, and new economic development proposals being advanced by Virginia’s Governor Bob McDonnell.

Over the coming weeks, EntreWorks Consulting’s Erik Pages will be on the road doing many speeches and public presentations.   These include appearances in Washington, DC, Augusta, ME, Moses Lake, WA, and Phoenix.  Hope to see you on the road!