In a longterm study of various UK government initiatives to support new and small firms, Bennett (2008) surveyed more than 2,000 firms in 1991, 1997, 2002, and 2004, finding that, overall, government inter vention is difficult to make effective at reasonable cost–benefit ratios. Bennett finds little evidence of market failure for grow ing and more innovative firms, but rather than systemic market failures in the United Kingdom only seems to influence very ear lystage startups.
Other contemporary studies concerning Vinnova’s research schemes “Forska & Väx” and “Vinn Nu” found negative effects instead (Daunfeldt et al., 2014). A closer look at the regional variation of these schemes showed that they had some positive effect in large cities, but the average effect became non-existent because the effect was significantly negative in sparsely populated ar eas (Tingvall & Videnord, 2018). The same was true in a more comprehensive study of all support from Vinnova, the Swedish Agency for Economic and Regional Growth, and the Swedish En ergy Agency: short-term effects but no long-term ones (Gus tafsson et al., 2016).
Recent evidence from the United States, Ita ly, and Germany suggest that incubators are very heterogenous and that, on average, incubated firms perform no better than comparable non-incubated firms when their support comes to an end (e.g. Amezcua, 2010; Lukes et al., 2019; Schwartz, 2013). In Sweden, arguably the first study to examine this issue was McShane’s (2017) investigation of the performance of informa tion and communications technology-incubated firms in south Swedish Malmö (Minc) and Lund (Ideon Innovation), where firms were observed before, during, and after the incubation period. McShane found that return on capital and sales actual ly dropped during incubation and continued to be significantly lower afterwards, compared to a matched sample of nonincu bated firms.
Furthermore, it appears that the support schemes can gen erate strange behavior in companies. Since there are several au thorities that distribute support, and because there is little coor dination between the authorities from which companies receive money, some companies systematically seek and obtain several grants for related purposes, in a sense becoming “subsidy en trepreneurs” with lower longterm productivity but being able to hire skilled workers and pay them well (Gustafsson, Tingvall, & Halvarsson 2018). It is unclear what effects this will have for society at large, but it would be problematic if the grants de signed to stimulate innovation instead led to some companies simply specializing in getting grants.
Lerner (2009, p.5) summarized extant evidence on government interventions for innovation as: “for each effective government intervention, there have been dozens, even hundreds, of failures, where sub stantial public expenditures bore no fruit.” In their article “Pub lic policy to promote entrepreneurship: A call to arms,” Acs and colleagues (2016) similarly note:
Reviewing established evidence, we find that most Western world policies do not greatly reduce or solve any market failures but instead waste taxpayers’ money, encourage those already intent on becoming entrepreneurs, and mostly generate one- employee businesses with low-growth intentions and a lack
of interest in innovating. Most policy initiatives that would have the effect of promoting valuable entrepreneurship would not be recognizable as such, because they would primarily address other market failures: A central-payer health care [system] would remove healthcare related distortions affecting employment choices; greater STEM education would produce more engineers of which some start valuable new firms; and labor market reform to encourage hiring immigrants in jobs they have been educated for would reduce inefficient allocation of talent to entrepreneurship.
Empirically, however, it is doubtful whether such support initiatives work as intended. In the same way as it is difficult for the market to know which companies should receive mon ey, it is equally difficult for government officials to make such an assessment. The presumed existence of a market failure is a necessary but insufficient criterion for public intervention. The criterion is insufficient because the government’s ability to solve market failures presupposes the absence of policy failures, caused by both administrative costs and information problems and risks of distorted incentives.
Several studies, national as well as international, claim that the supply of competence in Sweden is suboptimal for a mod ern economy (Karlson et al., 2017). For example, the World Bank’s 2014 report on the Swedish business climate highlight ed a lack of human capital as the biggest obstacle to continued growth. Particularly noticeable were the problems in the metal and engineering industries, where there were few employees with relevant professional skills (World Bank, 2014).
There are several reasons for this lack of competencies. In Ratio’s earlier Competence for Growth research program, re sults stated that competencies can be enhanced by addressing four different components, namely: 1) the quality, efficiency, and relevance of education; 2) employers’ involvement and par ticipation in education design and implementation; 3) address ing rigidities in the overall labor market functionality; and 4) updating of skills and continued learning (Ellström, 1998; Karl son et al., 2017).
More contemporary empirical studies also show the need for new competencies to successfully han dle digitalization. For example, when the hearing-aid industry switched to 3D printing of earbuds in the early 2000s, the need for new competencies was the single greatest challenge for these companies (Sandström, 2016).
Innovators and en trepreneurs are therefore often generalists rather than special ists; they are looking for business opportunities and are rarely interested in whether something constitutes a scientific discov ery or not. These underlying priorities and incentives are likely the roots of empirical findings that show that companies created by researchers generally perform worse than companies started as spin-offs from large companies (Wennberg et al., 2011).
Although the above is of course a simplification, the differ ences between research, innovation, and entrepreneurship mean that universities are rarely suitable for generating innovation.
Given the opportunity costs, it therefore seems logical that, rather than increasing the emphasis on their own commercial ization of research results, universities should prioritize ful fillment of their core tasks: research and education. However, closer cooperation between the universities and the business community is needed, preferably pure coproduction and com missioned research, and increased personnel mobility (e.g., through industrial doctoral students). Universities also need to increase the relevance of their educational programs and offer more opportunities for internships.