180Nu (Win Now) and Forska & Väx (Research & Grow). These programs were chosen because they both target growth-oriented innovative SMEs with the purpose of increasing innovative activities and job growth. The programs are administered by Vinnova, a Swedish government agency under the Ministry of Enterprise and Innovation. Vinn Nu was initiated in 2002 with the logic that there was a lack of private funding for young R&D-intensive ﬁrms. This program targets innovative startup companies with the objective of improving their conditions for survival, helping the commercialization of innovations, and attracting external capital. The expectation is that this program will help these companies to grow and become more successful businesses. These grants do not require a ﬁrm cash match, but the ﬁrm must have developed a product, method, or service that has not yet reached the market in order Do Targeted R&D Grants toward SMEs Increase Employment and Demand for High. . .

181to qualify for the grant. The maximal amount that a ﬁrm could receive during the study period was 300,000 Swedish krona (SEK).1

Applications to Vinn Nu are ﬁrst evaluated by an internal group of experts within Vinnova and the Swedish Energy Agency. Approximately half of the applications go to a second round, where they are judged by a panel of external experts. The ﬁnal candidates are then called to an interview before Vinnova decides which ﬁrms will receive the grant (Samuelsson & Söderblom, 2012).

Forska & Väx was launched in 2006 and targets SMEs with existing R&D activities. The program seeks to stimulate innovation-driven growth for the targeted companies. In contrast to Vinn Nu, Forska & Väx is a matching grant that requires at least 50% co-ﬁnancing of the R&D investments by the targeted ﬁrms. The applicants could apply for a maximum of ﬁve million SEK, and they were required to have at least one million SEK in sales (or in share capital) and no more than 250 employees to be eligible for funding. Firms also needed to demonstrate the potential to improve on or develop new products. Some ﬁrms also applied for a smaller grant to develop an implementation plan of the larger R&D project within the scope of the program. In this case, ﬁrms could apply for a maximum of 300,000 SEK without co-ﬁnancing. This smaller grant only required applicants to have achieved 300,000 SEK in sales.2

According to the calls for submissions of these programs, they both seek to promote the development of new products and processes that could bring about new innovations and promote job growth among SMEs. This is also emphasized by the fact that the agency had to report “change in turnover, employment and value added” of the supported companies to the government (Ministry of Industry, 2013). The programs are thus designed to increase the demand for labor and the purpose is also to help companies run development projects. It is therefore reasonable to assume that the grants should facilitate the recruitment of key individuals with the skills and abilities to innovate and thereby increase the share of employees with higher human capital. Hence, if effective, these grants should have a positive effect on the number of employees and the share of skilled workers in the targeted SMEs.

In Table 1, we present the number of yearly grants along with average grant size (SEK) from Vinn Nu and Forska & Väx, respectively, during the period 2002–2010. Since a grant is sometimes paid out in parts, it is possible for individual grants to encompass multiple payouts. An average of 14 grants per year were made under Vinn Nu. Samuelsson and Söderblom (2012) noted that 1309 ﬁrms applied for support from Vinn Nu during 2002–2011, which means that approximately 10% of all applicants received a grant. Forska & Väx has approximately ten times more grants per year compared to Vinn Nu. The average amount paid out is also almost four times higher under the Forska & Väx program. Targeted ﬁrms under Vinn Nu received, on average per year,

1This corresponds to approximately US$40,200 based on the average SEK/USD exchange rate (0.1340) during the period 2002–2010. 2These development grants represent a small share of the Forska & Väx program.

182S.-O. Daunfeldt et al.

Table 1 Number of yearly grants and average grant size (SEK) for each program, 2002–2010

Number of yearly grants Average grant size (SEK) Year Vinn Nu Forska & Väx Vinn nu Forska & Väx 2002 5 300,000 2003 16 193,977 2004 5 125,000 2005 19 211,111 2006 18 150 180,000 904,341 2007 18 65 150,000 651,911 2008 12 45 123,103 378,016 2009 14 165 152,818 689,474 2010 18 121 174,194 359,554 Average, 2002–10 14 109 178,911 596,659

received 178,911 SEK during 2002–2010. This can be compared with 596,659 SEK, the average amount paid out under Forska & Väx, yearly, during the study period.

4 Empirical Method

4.1 Matching

The ideal goal when investigating the effects of targeted R&D grants toward SMEs