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Small Business Economics

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14-01-2020

Public SME grants and firm performance in European Union: A systematic review of empirical evidence

Authors: Ondřej Dvouletý, Stjepan Srhoj, Smaranda Pantea

Published in: Small Business Economics | Issue 1/2021

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Abstract

Governments allocate financial resources to support small- and medium-sized enterprises (SMEs) through public subsidies and grants. However, do these public investments help supported firms to increase their performance and growth? We answer this question by conducting a systematic review of evidence in the European Union. We review studies investigating the effects of public grants on firm performance in the European Union’s 28 member countries that were published from 2000 on. We provide a structured overview of 30 studies covering 13 countries. Our review offers information on the methodological approaches, variables and findings of the previous studies. The summarized findings show mostly the positive outcomes of the grants on firm-survival, employment, tangible/fixed assets, sales/turnover, with mixed findings for labour productivity and total factor productivity (TFP). However, we point out that there are significant differences concerning the time period of analysis (investigating short-term vs long-term outcomes), and importantly, the heterogeneity of effects concerning firm size and age, region, industry and intensity of support. Our study offers a series of recommendations for policymakers and researchers.

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Based on the three waves (2005, 2010 and 2015) of the European Survey on Working Conditions (EWCS).

General Block Exemption Regulation 651/2014 declared certain categories of aid compatible with the internal market. Regional aid and aid for SMEs were the first two categories mentioned (European Commission 2014).

However, it is worth noting that there are also large common EU entrepreneurship support programmes such as Competitiveness and Innovation Framework Programme (2007–2013) and COSME Programme (2014–2020), for details we refer to European Commission website (2019).

Most of the state aid for SMEs is ‘minimis’ aid, defined as small amounts of state aid to firms about which the EU countries do not have to notify the European Commission (European Commission 2006).

In contrast, Spengel et al. (2015) show that tax incentives to support SMEs in the EU cover a large variety of instruments, which makes the results difficult to compare.

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Title: Public SME grants and firm performance in European Union: A systematic review of empirical evidence
Authors: Ondřej Dvouletý
Stjepan Srhoj
Smaranda Pantea
Publication date: 14-01-2020
Publisher: Springer US
Published in: Small Business Economics / Issue 1/2021
Print ISSN: 0921-898X
Electronic ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-019-00306-x

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