New Evidence on Innovation Vouchers

I’ve long been a fan of innovation vouchers, and have written often about them, wondering why they are not more common here in the US.  For those new to this topic, innovation vouchers are common tool in Europe and across the world.  These programs provide small grants to firms to help defray the cost of innovation in areas such as worker training, patenting, or accessing specialized consulting support. 

Most evaluations of innovation vouchers (or growth vouchers) have found them to be very effective.  Newer evaluation efforts, including one of the largest randomized controlled trial studies of vouchers, are finding somewhat more mixed results.  A new UK study of Britain’s growth voucher program, “Does Subsidizing Business Advice Improve Firm Perfomance,” is instructive on this front.  This program, which operated in the mid-2010s, provided vouchers (up to around $2500) to access outside training and consulting.

The researchers assessed the effects of this support, and found big impacts in the Year 1.  After receiving this support, firms increased sales and, to a lesser extent, employment levels.  However, these impacts did not persist over time. The researchers find several potential causes for the limited long-term effects. The biggest factors seem to stem from the inability of supported firms to make an additional leap by further improving business assets or capabilities.  In other words, growth can be sparked but sustaining it can be challenging.  In addition, much of the first year revenue growth came from local sales, and shifting to sales outside of the locality or in new markets proved more difficult for firms. If you’re interested in learning more about vouchers, this well-done report is worth a read.