Benefits and barriers of an enterprise's participation in publicly funded R&D projects. The example of Swiss enterprises in the field of renewable energy

Master's Thesis, 2011

124 Pages, Grade: 5.5 (Schweizer Notensystem)


Table of contents


Statutory declaration


List of tables and figures

List of abbreviations

1 Introduction

2 Review of selected theories on firm competitiveness
2.1 General aspects
2.2 Industrial organisation view
2.3 Resource-based view of the firm
2.4 Dynamic capabilities
2.5 Knowledge-based view of the firm

3 R&D funding in Switzerland
3.1 General aspects
3.1.1 Switzerland as a research location
3.1.2 Relevant Swiss research promoting institutions
3.1.3 SME specific issues
3.2 Funding programmes of the SFOE
3.2.1 Hydropower research
3.2.2 Biomass and Wood energy research
3.2.3 Photovoltaics research
3.2.4 Solar heat and heat storage research
3.2.5 Wind energy research
3.2.6 Heat pumping technologies, cogeneration, refrigeration research
3.2.7 Indirect support of geothermal energy
3.3 Funding by the CTI
3.3.1 R&D projects
3.3.2 The CTI "Innovationsscheck"
3.3.3 Feasibility studies

4 R&D funding at the European level
4.1 General aspects
4.1.1 Europe as a research location
4.1.2 Relevant EU research promoting instruments
4.1.3 SME specific issues
4.2 7th Framework Programme for Research and Technological Development
4.2.1 FP7-Cooperation-ENERGY
4.2.2 FP7-Cooperation-ENVIRONMENT
4.2.3 FP7-Capacities-Research for the benefit of SMEs
4.4 EUREKA Eurostars

5 Potential benefits of and barriers to participation for SMEs
5.1 Benefits
5.1.1 Reduced time-to-market for a product
5.1.2 Outsourcing of R&D
5.1.3 Financing a demonstration or prototype project
5.1.4 Acquiring intellectual property rights
5.1.5 Accessing new technological know-how
5.1.6 Expanding the company network
5.1.7 Enhanced company reputation and visibility
5.1.8 Economic impacts
5.2 Barriers

6 Research methodology
6.1 Research questions and hypotheses
6.2 Quantitative research (company survey)
6.2.1 Sampling approach
6.2.2 Collaboration with external organisations
6.2.3 Questionnaire and survey implementation
6.3 Qualitative research (expert interviews with funding bodies)
6.4 Data analysis

7 Research findings
7.1 Response rate
7.2 Previous participation vs. non-participation
7.3 Companies with previous participation
7.3.1 Funding bodies used
7.3.2 Benefits gained from participation
7.3.3 Companies’ evaluation of their participation
7.4 Companies without previous participation

8 Discussion of research findings
8.1 Companies with previous participation
8.1.1 Funding bodies used
8.1.2 Benefits gained from participation
8.1.3 Companies’ evaluation of their participation
8.2 Companies without previous participation

9 Conclusion and recommendations

List of references

Glossary of terms


Appendix 1: German names of Swiss government bodies

Appendix 2: Questionnaire of the survey (original)

Appendix 3: Questionnaire of the survey (translation)

Appendix 4: Covering letter of the survey

Appendix 5: First reminder of the survey

Appendix 6: Second reminder of the survey

Appendix 7: Selected answers to question 7 (original and translation)

Appendix 8: Additional answers to question 8 (original and translation)

Appendix 9: Selected answers to question 9 (original and translation)


This thesis studies the involvement of small and medium-sized enterprises (SMEs) in publicly funded research and development (R&D) projects. SMEs represent 99% of all companies in Europe and are important drivers of innovation, yet many lack the necessary resources to engage in formal research activities. Providing these firms with the possibility to make use of public funding programmes for R&D projects therefore constitutes a way of stimulating them to innovate. Reviews of such programmes, however, show that SME participation is frequently lower than desired by policy makers. This raises the question of the benefits SMEs can gain from such projects and the barriers that negatively influence their ability to participate. The author hypothesises that taking part in publicly funded R&D projects can positively influence an SME’s competitiveness through a specific set of advantages gained from participation. The second hypothesis is that companies with previous experience in such projects evaluate their participation positively. Finally, the author puts forward that a number of specific barriers limit SMEs’ ability to participate. The hypotheses were tested by means of an online survey among Swiss SMEs in the field of renewable energy, as well as interviews with representatives of national and EU funding bodies. The results support all three hypotheses and confirm the importance of the public measures. Participation in publicly funded R&D projects can indeed have positive impacts on an SME’s competitiveness. Also, companies tend to evaluate their participation positively. SMEs with previous experience in such projects were well-informed about the specifics of a participation prior to filing an application, whereas a substantial lack of information exists on the part of companies without previous experience. This study adds to the existing pool of literature on SME competitiveness, and through its narrow focus addresses a very specific area where little research has been conducted to date. As such, the thesis is of relevance to the business, research, and political communities.

Statutory declaration

"I, the undersigned, declare that I have written this thesis myself and that I have not used any sources or resources other than stated for its preparation. I further assert that I have indicated all direct and indirect quotations. I declare that all statements and information contained herein are true, correct and accurate to the best of my knowledge and belief. This thesis has not been submitted elsewhere for examination purposes."

Date: 31 January 2011

Name: Manuel Kaar



I would like to express my sincere gratitude to all those contributors whose efforts made it possible for me to construct this thesis. I would like to thank the teams of the University of Applied Sciences Northwestern Switzerland (FHNW) and Anglia Ruskin University (ARU) Cambridge, United Kingdom, for their excellent support during the time of my studies at these institutions. In particular, I would like to thank Prof Dr Matthias Kiese (FHNW) for his exemplary assistance during the research process for this thesis.

Special thanks go to Dr Jeanette Müller of accelopment AG, who made a number of important contributions to this research project and invested much of her time to share her comprehensive expertise on public funding schemes with me. In addition, I would like to thank the representatives of the organisations listed in chapters 6.2.2 and 6.3. All of them contributed either with time for interviews or with the provision of their organisation’s logo in the online company survey.

Further, I also wish to thank the team of the Centre for Education and New Learning at the Zurich University of Applied Sciences, in particular Ms Jennifer Erlemann, for their great help in setting up the technical infrastructure for the survey. Above all, I am deeply indebted to my parents, who are giving me wonderful and invaluable support in all of my academic, professional and private endeavours.

List of tables and figures

Table 1: Major views on the determinants of firm competitiveness

Table 2: Breakdown of the Swiss government’s total direct R&D spending

Table 3: EU Framework Programmes for Research and Technological Development

Table 4: FP7 Specific Programmes

Table 5: Key data on selected EU funding programmes

Table 6: Industries in renewable energy, Swiss associations / interest groups for
these industries, and number of companies selected for survey participation

Table 7: Swiss organisations that provided support for this thesis

Table 8: Response rate of the survey

Table 9: Contingency table: firm size * importance of funding

Table 10: Statistics for statements 1-3 by firm size categories, and ANOVA

Table 11: Contingency table: mean value for statements 1-3 * costs as expected

Table 12: Contingency table: mean value for statements 1-3*benefits exceeded cost

Table 13: Summary of survey results for question 5

Table 14: Summary of the research results of this thesis

Figure 1: Research approach of this thesis

Figure 2: Results for question 1 of the survey

Figure 3: Results for question 2 of the survey

Figure 4: Results for question 3 of the survey

Figure 5: Results for question 4 of the survey

Figure 6: Results for question 5 - statement 1 of the survey

Figure 7: Results for question 5 - statement 2 of the survey

Figure 8: Results for question 5 - statement 3 of the survey

Figure 9: Comparative boxplot: firm size*mean value for statements 1-3

Figure 10: Results for question 5 - statement 4 of the survey

Figure 11: Results for question 5 - statement 5 of the survey

Figure 12: Results for question 6 of the survey

Figure 13: Results for question 8 of the survey

List of abbreviations

illustration not visible in this excerpt

*A list of the government bodies’ German names is provided in appendix 1.


- The terms company, firm, business, and enterprise may be used interchangeably throughout this thesis.
- Terms for which an explanation is provided in the glossary are marked in italics the first time they appear in the text.

1 Introduction

Never before in history has global demand for energy been stronger than today. While exhaustible resources such as oil, gas, and coal are expected to remain the world’s primary basis of energy generation in the near future, alternative resources like biomass, solar, or wind energy are predicted to grow significantly in importance (e.g. International Energy Agency, 2009). The strong global energy demand, together with rising costs of finding and exploiting fossil fuels, has contributed to a considerable increase in public awareness for the energy supply issue in recent years, and thus also to an acceleration of the investments and developments in the field of alternative resources (REN21, 2009, p. 4). Yet, in order to achieve a fundamental shift away from exhaustible resources on a long-term basis, creative innovations and new technology solutions for renewable energy production are vital.

The basis for the successful development and commercialisation of such new technologies is effective research and development (R&D) work by companies, universities, and other organisations. Small and medium-sized enterprises (SMEs) take on a special role in this respect. The majority of European companies are SMEs if measured by the EU criteria (EC DG Research Communication Unit, 2010a, p. 6), that is, they have less than 250 employees, and an annual turnover and/or balance sheet total lower than EUR 50 million and/or EUR 43 million, respectively.

The large number of SMEs in Europe implies that there is a high diversity, and thus also a vast potential for innovation, in these organisations. Nevertheless, in most countries, including Switzerland, the bulk of research in the private sector is undertaken by larger businesses (SFSO, 2010, p. 9). In Switzerland, R&D by SMEs (SFSO definition, i.e. firms with less than 100 employees) accounted for only 16% of total in-house R&D spending in 2008, although some 99% of Swiss companies are categorised as SMEs (SFSO, 2010, p. 9). In addition, many smaller companies do not engage in R&D at all, as they simply do not possess the necessary resources (SFSO, 2010, p. 9).

These facts lead to a situation where much potential for innovation in smaller firms remains unused. Providing SMEs with the opportunity to engage in publicly funded R&D projects offers one way to tap into this potential for innovation that would otherwise continue to lie idle, and is therefore highly reasonable from a policy point of view. At the same time, participation in such projects potentially also has a number of positive impacts on the SMEs involved. The latter is the focus of this thesis, which concentrates on the participation of Swiss SMEs in the field of renewable energy in publicly funded R&D projects. As such, this thesis is concerned with the company point of view rather than the policy perspective.

In general, a large number of R&D funding programmes exist nationally in Switzerland and at the European level with opportunities for SMEs to participate (examples in the field of renewable energy will be introduced in this thesis). Yet, reviews of funding programmes reveal that SME participation is frequently lower than desired (e.g. EC DG Research SME Unit, 2010a, p. 1). This gives rise to three central questions: (i) How important is participation in a funded project for the involved SMEs in terms of the benefits they can gain from participating, (ii) What do companies which took part say about their participation, and (iii) What are the main barriers to participation? Based on these broad questions, the main goal of this thesis is to shed light on three major points: (i) the influence of SMEs' participation in a publicly funded research project on their competitiveness, (ii) the companies’ evaluation of various aspects of their participation, and (iii) the reasons for non-participation of SMEs.

To this end, the report starts with a brief review of major theories on firm competitiveness in chapter 2, with a special focus on resource-based perspectives of the firm (see figure 1 for the structure of the thesis). The empirical findings of this research project are later discussed in the light of these concepts. The thesis then continues with a presentation of selected national and EU funding programmes suitable for Swiss SMEs in the field of renewable energy in chapters 3 and 4. Here the aim is to identify the programmes’ central goals and funded activities in order to derive a list of benefits that companies can potentially gain from participation.

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Figure 1: Research approach of this thesis. Source: author.

The most important benefits are then summarised in chapter 5, together with a list of barriers to participation. These findings form the basis of the primary research undertaken within the scope of this thesis, which in turn investigates the research questions through an online company survey on the one hand, and expert interviews with representatives of funding bodies on the other. Finally, in chapters 8 and 9 the findings from the literature review and the empirical section are contrasted and analysed, conclusions are drawn, and recommendations for SMEs are provided.

2 Review of selected theories on firm competitiveness

2.1 General aspects

In today’s globalised world, creating and maintaining a competitive advantage in the market has become a necessity for almost any firm that strives to deliver stable and enduring value to its stakeholders. A state of competitive advantage is generally understood as a situation in which a firm can achieve higher economic returns than its rivals (Amit and Shoemaker, 1993, p. 33; Grant, 1996, p. 110; Besanko et al., 2007, p. 346). In simple terms, competitive advantage can be obtained by capitalising on opportunities that other firms do not or cannot use (Besanko et al., 2007, p. 430).

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Table 1: Major views on the determinants of firm competitiveness in the strategic management literature. Source: adapted from Fiegenbaum et al., 1996, pp. 222-3 and Kraaijenbrink et al., 2010, p. 350.

Yet, what factors cause and influence differences in competitiveness has been subject to considerable debate, and a number of views on the determinants of firm competitiveness have evolved in the strategic management literature. Two key perspectives will be introduced here: those views that relate competitiveness largely to external factors (notably the industrial analysis framework) and those that associate differences in firm competitiveness mainly to internal factors (notably the resource perspective). Table 1 provides an overview of these two views and their fundamental differences. The two perspectives are seen as opposing by some and as complementary by others (e.g. Mahoney and Pandian, 1992, p. 363; Amit and Shoemaker, 1993, p. 35). Efforts have also been made to combine them (e.g. Fiegenbaum et al., 1996).

The following sub-chapters offer a brief introduction to these elementary views and to concepts that developed on the basis of their main arguments. This review of the literature on competitiveness is essential for the overall structure of this thesis, as the concepts introduced in this section are later used in the analysis of the empirical results. Due to its higher relevance in the context of this thesis, the resource perspective will be employed for the analysis in chapter 8 rather than the industrial organisation view. Note that due to the limited scope of this report, the following review of concepts will concentrate on a presentation of their core arguments rather than attempting to provide a complete discussion.

2.2 Industrial organisation view

The industrial organisation (IO) view proposes that a firm’s competitiveness largely depends on external factors, and considers industry structure as the central determinant of competitiveness (Kraaijenbrink et al., 2010, p. 350). One of the IO view’s most prominent proponents and contributors is Michael Porter who, in his renowned 1979 Harvard Business Review article, identified five basic forces which determine the state of competition in an industry: (i) the threat of new entrants, (ii) the bargaining power of suppliers, (iii) the threat of substitute products or services, (iv) the bargaining power of customers, and (v) the level of rivalry among current competitors (Porter, 1979; Porter, 2008, pp. 3-21). In essence, the concept proposes that if these forces are strong, this makes it more difficult for individual firms to remain competitive and negatively impacts the level of profitability they can achieve, which in turn makes it less attractive to be in this industry in the first place.

An important aspect with relevance for the topic of this thesis is that government support for collaborative research projects (in particular, applied research projects) leading to direct cooperation between players in the same industry is regarded as a fundamental political flaw by Porter (Porter, 2008, pp. 203-4). Cooperative research of such companies, he argues, is only reasonable "under certain limited conditions" and only for basic product and process research (Porter, 2008, p. 204).

2.3 Resource-based view of the firm

Despite considerable criticism mainly for its simplifying nature, the resource-based view of the firm (RBV) remains one of the central concepts in management theory that attempt to explain differences in firm competitiveness (Hoopes et al., 2003, p. 889; Kraaijenbrink et al., 2010, p. 350). The RBV primarily developed between 1984 and the mid-1990s (Kraaijenbrink et al., 2010, p. 351) and suggests that a firm’s internal resources and capabilities are the chief determinants for its competitiveness (Teece et al., 1997, p. 528; Kraaijenbrink et al., 2010, p. 350). As such, the firm is regarded as a unique collection of such resources (Wernerfelt, 1984; Barney, 1991; Peteraf, 1993).

Advocates of the RBV propose that a firm can achieve a state of sustained competitive advantage (SCA) if it succeeds in obtaining and retaining a pool of resources that are Valuable (they contribute to a firm’s efficiency and effectiveness), Rare (not possessed by a large number of companies), Inimitable (impossible for competitors to copy), and Non-substitutable (absence of strategically equivalent valuable resources must be given) (Barney, 1991, pp. 105-12). These attributes are commonly denoted by the acronym VRIN. SCA, in this respect, is referred to as an enduring state in which a firm can achieve higher economic returns than its competitors (Grant, 1996, p. 110). Resources in the context of the RBV can be any tangible or intangible asset that a firm possesses or controls, and the use of which can lead to improved efficiency and effectiveness (Wernerfelt, 1984, p. 172; Barney, 1991, p. 101).

The RBV further assumes heterogeneity between firms in terms of their resources, and that these resources may be immobile between firms (Barney, 1991, p. 101; Peteraf, 1993, p. 179-85). If resources were to be homogeneous and mobile across firms, they would not constitute much of a strategic asset in the sense that they set one firm apart from the other (Barney, 1986 cited in Teece et al., 1997, p. 517). Under the RBV, the main responsibility of management is to ensure that the company’s currently available resources and capabilities are exploited in the most efficient way, while future resources are built up simultaneously (Grant, 1996, p. 110).

With respect to the role of R&D, proponents of the RBV regard "technological capability" as one of the firm’s resources, and argue that continuous research efforts are critical for the defence of a company’s current position (Wernerfelt, 1984, p. 174). The literature also suggests that a clear distinction between resources and capabilities should be drawn (Amit and Schoemaker, 1993; Teece et al., 1997; Makadok, 2001 cited in Hoopes et al., 2003). Summarising Makadok’s (2001) ideas, Hoopes et al. (2003, p. 890) state that a resource is an "observable [...] asset that can be valued and traded [...]. A capability [...] is not observable [...], cannot be valued, and changes hands only as part of its entire unit." Several other concepts have evolved on the basic premise that firm competitiveness stems from internal factors. Two selected ideas will be introduced here: dynamic capabilities and the knowledge-based view of the firm.

2.4 Dynamic capabilities

The concept of dynamic capabilities, particularly brought forward by Teece et al. (1997), argues that firms need to adapt their capabilities on a continuous basis if they are to remain competitive in constantly transforming markets. Firms with strong dynamic capabilities, so the concept’s proposition, will be able to adapt and find new ways to gain competitive advantage by making use of arising opportunities, while firms with weak dynamic capabilities will ultimately lose their competitive advantage (Besanko et al., 2007, pp. 443-4).

Dynamic capabilities, then, are referred to as "[...] the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments" (Teece et al., 1997, p. 516). Pointing to the fact that not all companies are operating in "rapidly changing environments," Zollo and Winter (2002, p. 340) suggest a different definition and describe dynamic capabilities as "[...] learned and stable pattern[s] of collective activity through which the organization systematically generates and modifies its operating routines in pursuit of improved effectiveness."

Organisational processes, influenced by the firm’s assets and its evolution, are viewed as critical determinants for dynamic capabilities and subsequently for competitive advantage (Teece et al., 1997, p. 518). Therefore, a firm’s ability to adapt is understood to be "path dependent" in that the firm’s history (including for instance previous investments or established processes) can be a source of competitive advantage on the one hand, but can also limit the scope of possible decisions that can be made in the present and the future on the other (Teece et al., 1997, p. 522-23). Given this path dependency, implementing strategic change in a company is regarded as difficult and costly by Teece et al. (1997, p. 528-9).

2.5 Knowledge-based view of the firm

As the name suggests, proponents of the knowledge-based view (KBV) regard company-specific knowledge as the most important strategic resource a firm can possess (Grant, 1996, p. 110). The central idea is that competitive advantage stems from a unique set of intangible knowledge-based capabilities within the firm, rather than from tangible and finite resources originating outside the firm (Spender, 1996, p. 46). As such, the KBV evolved in conjunction with the RBV (Grant, 1996, p. 110) and is based on its core notions. A major difference between the two concepts can be found in the way knowledge is viewed as a resource. Although the RBV literature also lists knowledge as a key resource of the firm, it refers to knowledge in a more generic way, essentially treating it as an "objective transferable commodity" (Spender, 1996, p. 45).

The KBV literature, on the other hand, expands further on the topic and argues that there can be different forms of knowledge within an organisation (Grant, 1996; Spender, 1996). The KBV notion goes as far as looking at the firm as a "[...] dynamic, evolving, quasi-autonomous system of knowledge production and application" (Spender, 1996, p. 59). To illustrate the difference between the concepts, Scarbrough (1998, p. 193) uses the metaphor of a computer, stating that the KBV concentrates on the software and programming of the PC, while the RBV "[...] encompasses all the various resources that make up the computer system (the PC’s hardware plus other integral elements of the system)." Similar to dynamic capabilities, the KBV literature recognises that knowledge is path dependent; also, it must be transferable in-house in order to give a firm a competitive advantage (Grant, 1996, p. 111). Finally, it is important to emphasise that knowledge-based concepts like the KBV, RBV, and dynamic capabilities are strongly influenced by organisational theory (Foss, 1996, p. 470) and closely interlinked with several other strategic management concepts.

3 R&D funding in Switzerland

3.1 General aspects

3.1.1 Switzerland as a research location

Switzerland enjoys an excellent reputation as a research location, with both its policy makers and industry participants being well aware of the link between effective research activities and economic prosperity (Plaza Chardon and Sollberger, 2010, p. 5). Total R&D spending (i.e. including the private sector) rose from 2.94% in 2004 to 3.01% of GDP in 2008 (Plaza Chardon and Sollberger, 2010, p. 7), which compares favourably with the EU’s top three research destinations Sweden (3.73% in 2006), Finland (3.45%) and Germany (2.51%) (Wilén, 2008, p. 1). The business sector accounted for more than 70% of this expenditure in Switzerland in 2004 (OECD, 2008, p. 156).

In terms of public R&D spending (i.e. excluding the private sector), Switzerland ranks rather average compared to other countries, with about 0.66% of GDP spent on R&D funding in 2004 (OECD, 2008, p. 156). However, positive aspects worth noting are the fairly strong focus on SME funding and the promotion of business-academia interaction, as well as the extensive support of start-up companies (Arvanitis et al., 2005, p. 10). Switzerland’s total direct public R&D spending is organised into three sectors (Martin, 2009, p. 14): (1) R&D that is carried out by the government itself to perform its own tasks ("Intramural R&D expenditure"), (2) R&D that is mandated to third parties ("R&D contracts"), and (3) Support for the activities of research organisations such as universities or research centres ("R&D contributions").

The second and third forms of funding are relevant for the topic of this thesis, as companies can directly (through financial grants) or indirectly (through research work carried out for them) benefit from such funding. Table 2 shows the distribution of the Swiss government’s total R&D spending within these three areas. Clearly, there is a strong focus on the third form of funding in the overall breakdown of resources, with 86% of the government’s R&D budget in 2008 being contributions to activities of research organisations.

3.1.2 Relevant Swiss research promoting institutions

The funding agencies with the highest relevance to this thesis are the Swiss Federal Office of Energy (SFOE), the Swiss Innovation Promotion Agency (CTI) (both are introduced in further detail in the subsequent chapters), and partly also the Swiss National Science Foundation (SNSF) (OECD, 2006, p. 64), as Swiss SMEs in the field of renewable energy can potentially participate in R&D projects funded by these bodies. The allocation of funds within these agencies, as shown in table 2, reveals their funding priorities. As the data illustrates, the SFOE has a stronger orientation towards the second form of funding (the mandating of R&D activities to third parties) than the other bodies, making it an important point of contact for companies in the field of energy when it comes to direct financial support for their R&D projects.

The figures further demonstrate that the CTI and the SNSF have their main foci on the third form of funding (contributions to research organisations). When joining projects funded by these bodies, companies usually do not receive financial support, as the grants are exclusively used to finance the research organisation’s work (Martin, 2009). Instead, the involved companies indirectly reap rewards through the results of the work carried out by the RTD (research and technological development) provider.

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Table 2: Breakdown of the Swiss government’s total direct R&D spending by department and form of spending in 2008. *All data in CHF thousand. Note: Indirect spending e.g. through university funding is not included. Source: Adapted from Martin, 2009, p. 9.

3.1.3 SME specific issues

With respect to the R&D activities of Swiss SMEs, the country’s Federal Chancellery estimated that between 10,000 and 15,000 companies did not at all or only occasionally collaborated with universities for joint research efforts in 2007, despite the fact that they would have had the potential to do so (The Federal Authorities of the Swiss Confederation, 2007, p. 1302). Yet, cooperation between SMEs and academic institutions, that is, the exchange of knowledge between industry and academia, are generally accepted to be highly desirable from a policy point of view, e.g. in order to transfer innovative concepts developed at a university to the market. Thus, the Federal Authorities set the goal to substantially increase the number of companies that initiate, plan and coordinate such joint R&D projects until 2011, for instance by decreasing entry barriers, promoting high-risk projects, and by adapting the CTI’s service offers (The Federal Authorities of the Swiss Confederation, 2007, p. 1302). Special attention is given to the active support of small companies with no or insufficient internal resources for research and development activities (The Federal Authorities of the Swiss Confederation, 2007, p. 1303).

The following sub-chapters provide an overview of the most important funding options within the SFOE and the CTI for Swiss SMEs in the field of renewable energy. The objective of the chapters is to present the key research areas of the various funding programmes, their goals, and the activities funded under these programmes. This will permit identification of the most important benefits that companies can gain from participation. These benefits are subsequently summarised in chapter 5 and, in turn, form the basis of this thesis’ empirical research (in particular question 2 of the company survey).

3.2 Funding programmes of the SFOE

In 2008, the total SFOE funds going to Swiss companies in the form of mandated R&D projects amounted to CHF 8 million (Martin, 2009, p. 10). As such, the SFOE is a highly important funding body not only for companies in the energy sector in general, but also for SMEs active in the area of renewable energy. The SFOE’s research programmes in the field of renewable energy are (SFOE, 2010o):

- Hydropower research programme
- Biomass and Wood energy research programmes
- Photovoltaics research programme
- Solar heat and heat storage research programme
- Wind energy research programme
- Heat pumping technologies, cogeneration, refrigeration research programmes
- Mandate for the indirect support of geothermal energy

These programmes follow a co-financing, bottom-up approach to funding (i.e. research topics are suggested by the applicants rather than predetermined top-down by the funding agency), are laid out for a period of four years (2008-2011), and have been designed to achieve a specific set of energy goals formulated by CORE, the Swiss Federal Energy Research Commission (SFOE, 2007, p. 4). The following sub-chapters offer a brief overview of these programmes. The descriptions start off with basic information on the current state and use of the various forms of renewable energy in Switzerland in order to put the subsequent information into context, and continue with the major research foci and goals of the programmes. Finally, the activities funded under these programmes are explained to give the reader an idea of the benefits companies can gain from participating.

3.2.1 Hydropower research

In 2007, renewable energy sources accounted for about 55.6% of Switzerland’s overall electricity production (SFOE, 2010r). About 96% of this production came from hydropower (SFOE, 2010r). Other forms of renewable energy sources merely made up about 5.7% of total electricity generation (SFOE, 2010r). As such, hydropower as a source of electricity takes on a special role in Switzerland that is significantly different from other forms of renewable energy. Today, the use of hydropower in Switzerland and the available technologies are already at a highly advanced level (Jorde, 2010, p. 3). As a consequence, R&D activities under the hydropower programme primarily focus on maintaining the existing potential under changing environmental conditions, while exploiting the remaining resources, wherever possible, in an ecologically and socially sound way (Jorde, 2010, p. 3). The programme’s specific research priorities are (SFOE, 2010j):

- Structural measures
- New materials, components and technologies
- Socioeconomic aspects
- Ecological aspects

The programme further defines two major research areas: large-scale power plants (normally from 10 MW) and small-scale power plants (Jorde, 2010, p. 3). Research on larger plants focuses on the upgrading and expansion of storage capacity, while research in the field of smaller plants mainly deals with building new plants at places where, prior to the introduction of the cost-covering remuneration for feed-in to the electricity grid (CRF) in 2009, the economic operation of such plants would not have been possible (Jorde, 2010, p. 3). The CRF is a measure introduced by the Swiss government that guarantees cost recovery for input into the electricity network produced from renewable energy sources with the aim to further their development (SFOE, 2010q).

Since its inception in 2008, collaboration between companies and universities or other research organisations under the hydropower research programme has produced a number of new or improved technological concepts (Jorde, 2010). Project participation has also led to important networking effects between the involved stakeholders, both on the national and international level (Jorde, 2010, p. 8) as well as to increased visibility of the involved organisations through the attendance of international exhibitions and conferences (Jorde, 2010, p. 9). The programme’s objectives are, amongst others, the establishment of interdisciplinary networks, the support for international cooperation, the transfer to the market (SFOE, 2010h), and the funding of pilot and demonstration projects (SFOE, 2010i).

3.2.2 Biomass and Wood energy research

With a contribution of about 4% to total final energy consumption, energy from biomass and wood is currently the second most important source of renewable energy in Switzerland after hydropower (SFOE, 2010m, p. 5). Expectations of the future use of biomass as an energy source are high, and estimations by the SFOE indicate that about 10% of today’s (2004) primary energy consumption in Switzerland could come from biomass (Hermle et al., 2008, p. 4; SFOE, 2010m, p. 3). As such, biomass is considered essential for the implementation of Swiss energy and climate policies and has become a public research priority.

The research foci of the Biomass and Wood energy programmes are based on the target to triple the use of biomass (including wood) by 2050, a goal formulated by CORE (Hermle, 2010, p. 3). To achieve this target, the programmes concentrate on three major technologies: combustion, gasification, and anaerobic fermentation (Hermle et al., 2008, p. 4). Within these technologies, the programmes aim to promote three core research activities: systems optimisation and integration, quality assurance, and the development of new processes and technologies (Hermle et al., 2008, pp. 26-9).

The goals of the research area "systems optimisation and integration" are to improve the efficiency of the overall system, to reduce emissions and costs, and to provide an extensive assessment of the value chain (Hermle et al., 2008, p. 26). The second core research focus, quality assurance, aims at the development of new measures for the quality control of market-ready technologies, the implementation of existing measures for quality assurance, and the development of standards (Hermle et al., 2008, p. 27). The third major research area concentrates on the development of new technologies, their testing in laboratories, their implementation, scientific monitoring, measurement, and analysis (Hermle et al., 2008, p. 28). Amongst others, the Biomass and Wood energy programmes support the realisation of prototype projects, the promotion of national and international networking between involved stakeholders (e.g. through events) and the increase of the stakeholders’ visibility (SFOE, 2010a; Hermle, 2010).

3.2.3 Photovoltaics research

The use of photovoltaics as a source of electricity has increased in Switzerland in recent years, with a peak in 2007 at 6.5 megawatts (MW) up from an average of 2 to 3 MW in the previous years (SFOE, 2010k). Again, the introduction of the CRF had an important positive impact on the spread of the technology throughout the country. The main focus of the SFOE’s Photovoltaics research programme is on applications for integration into buildings (SFOE, 2010l). Some selected goals of the programme are: a reduction of the costs and an increase in the level of efficiency of solar cells and modules, a decrease in the quantities of materials and energy used, a simplification and standardisation of electrical systems technology together with an increase in the service life and reliability of inverters, and an increase in the availability and variety of industrial products (SFOE, 2010l). To achieve these goals, research under the Photovoltaics programme concentrates on the following areas (SFOE, 2010l):

- Solar cells
- Solar modules and integration into buildings
- Electrical systems technology
- Related topics
- Institutional co-operation at the international level

Important activities under the Photovoltaics programme are the support of demonstration and pilot projects, the extensive promotion of collaboration between industry and academia, and the facilitation of information exchange between stakeholders (e.g. through workshops or conferences) (Nowak, 2010). Special importance is attached to cooperation on an international scale, which is reflected in the participation of several important Swiss organisations in European research projects, such as in the context of FP7 (Nowak, 2010).

3.2.4 Solar heat and heat storage research

With a share of 0.13% of total production (as of 2007), electricity from solar energy only plays a minor role in Switzerland (SFOE, 2010r). However, the development potential of thermal solar energy is generally expected to be strong (SFOE, 2010b). Swiss research in the field tends to be highly specialised and applied, and is frequently part of larger international research efforts (SFOE, 2010b). The major goal of the Solar heat and heat storage programme is to make solar thermal systems for buildings competitive in the market through technological improvements (SFOE, 2010c). Thus, the programme’s foci are (SFOE, 2010c):

- Increase in capacities and economic life time of solar collectors and components
- New coatings for collectors
- Simplified and standardised systems and components
- Constructional and technical integration
- Seasonal storage
- Planning tools

As it is the case with most of the other SFOE programmes, market-oriented research and pilot and demonstration projects are important funding priorities under the Solar heat and heat storage programme (SFOE, 2010d). The programme exhibits a special orientation towards the timely transfer of research findings into practical market applications (SFOE, 2010b).

3.2.5 Wind energy research

As of 2007, electricity from wind energy accounted for only 0.004% of total production in Switzerland (SFOE, 2010r), and even though the number of wind energy plants in operation grew from 34 in 2007 (SFOE, 2010s) to 37 in 2009 (Horbaty, 2010, p. 3), wind plays a negligible role in the Swiss energy system. However, an important characteristic of the sector in Switzerland is the remarkable component supplying industry that has evolved in recent years and is mainly active on the international level (Horbaty, 2010, p. 3).

As a result, similar to R&D in the field of solar energy, research on wind energy in Switzerland is strongly integrated with cross-national research efforts (SFOE, 2010s). Due to Switzerland’s geographical structure, a major focus is on the use of wind energy in regions which are difficult to access, such as mountainous areas (Horbaty, 2010, p. 4), or regions marked by challenging environmental conditions, such as cold climate (Horbaty, 2010, p. 10). To achieve the country’s overall goals regarding the use of renewable energy, the objective for the wind industry is to increase annual capacities from 25 GWh currently to 600 GWh by 2030 (Horbaty, 2010, pp. 3-4). The Wind energy research programme concentrates its activities on the following areas (SFOE, 2010u):

- Development of system components
- Increase in the availability and energy yield of wind power plants at extreme locations
- Enhancement of the status of wind energy, optimal integration of wind power plants into the power supply
- Promotion of the degree of acceptance for wind energy

Applied research, networking actions, and pilot and demonstration projects are among the activities funded under the Wind energy research programme (Horbaty, 2010; SFOE, 2010t).

3.2.6 Heat pumping technologies, cogeneration, refrigeration research

Today about 1.7% of Switzerland’s total electricity consumption is produced by roughly 130,000 heat pumps, and it is estimated that these figures will increase to 4% and 400,000 until 2020 (SFOE, 2010e). Introducing public R&D funding programmes in this field is highly reasonable, as 65% of the energy needed for the heating of buildings still comes from non-renewable sources today (SFOE, 2010e). To further the development of heat pumping technologies, the programmes target improvements in the following areas (SFOE, 2010f):

- Conversion of ambient heat from the ground, water and surrounding air into useful heat (e.g. for heating systems)
- Conversion of chemical energy stored in fuels into mechanical or electrical energy
- Cooling with the aid of refrigeration systems

Based on these goals, research under the programmes is expected to increase efficiencies, optimise systems, reduce costs through standardisation, reduce pollutant emissions, and increase reliability in the field of cogeneration (SFOE, 2010f). Examples of activities funded under the programme are the direct financial support of projects, the promotion of networking on the national and international level, and the provision of opportunities for stakeholders to attract attention, e.g. through conferences (SFOE, 2010g).

3.2.7 Indirect support of geothermal energy

In 2005, about 1,100 GWh of geothermal energy were produced in Switzerland (SVG, 2010b), which ranks the country high especially for low-temperature heat in an international comparison (SVG, 2010a). In the field of geothermal energy the SFOE has given a mandate to the Swiss Association for Geothermal Energy with the aim to advance the development of technologies in the field. The association’s activities centre on three major areas: educational offers, quality assurance through a quality label, and communicational activities such as a specialist magazine or attendance of events in the field of renewable energy (Wyss et al., 2009). As such, the association promotes the spread of geothermal energy mainly through indirect measures. However, the SFOE also supports research projects in the field of geothermal energy within the context of its other research programmes (SFOE, 2010p).

3.3 Funding by the CTI

3.3.1 R&D projects

The CTI, the Swiss Confederation’s Innovation Promotion Agency, has been providing funds for R&D and innovation projects to promote the exchange of knowledge between companies and academia for about 60 years (OPET, 2010f). With a budget of CHF 532 million between 2008 and 2011, the CTI mainly co-finances market-oriented projects with a clear goal to develop products or services (OPET, 2010a; OPET, 2010f), and is therefore one of the most important funding institutions for Swiss SMEs. Besides facilitating projects within Switzerland, the CTI also supports companies’ efforts to join international research projects (The Federal Authorities of the Swiss Confederation, 2007, p. 1302). As mentioned in chapter 3.1.2, contrary to the SFOE programmes where companies can also receive direct financial support, CTI funds are entirely used for the financing of the RTD provider’s research services. In this way, the involved companies – primarily SMEs with limited R&D budgets – have the possibility of outsourcing research activities without additional costs (OPET, 2010a). This, in turn, enables them to benefit from academic know-how while focusing their resources on their own core capabilities, which usually results in a significant reduction in the time-to-market (TTM) for innovations (OPET, 2010a).

CTI funding follows a bottom-up approach and is open to all research areas that create scientific innovations and economic impact (OPET, 2010a; OPET, 2010f). As such, innovative potential and economic impact are also the central funding criteria (OPET, 2010a). The CTI support generally covers 50% of the project costs (OPET, 2010b). Besides R&D project financing, two other support measures are of particular relevance for the topic of this thesis: the CTI "Innovationsscheck" and feasibility studies.

3.3.2 The CTI "Innovationsscheck"

The first edition of the CTI "Innovationsscheck" ("innovation cheque") initiative was launched in 2009 as a CHF 1 million pilot project that offers SMEs, in all areas of technology, a "cheque" of up to CHF 7,500 for R&D services of research institutions such as universities (OPET, 2010d). The initiative specifically addresses SMEs without prior experience in science-based innovation projects and aims at encouraging them to start working with universities or research centres (OPET, 2010d). Demand during the first round of the initiative exceeded supply (OPET, 2010d), and as a result the initiative is currently being repeated. Participation in the second edition is exclusively reserved for SMEs active in the area of Cleantech (i.e. industries and services that preserve and maintain natural resources and systems), which can be described as unusual for the CTI, since funding by this government agency is usually not limited to a specific topic area.

3.3.3 Feasibility studies

With a maximum contribution of CHF 100,000 per project, the CTI also offers support for feasibility studies that take less than one year to complete (OPET, 2010b). The goal is to assist companies in assessing whether their idea for an innovation has a realistic chance of success and in which time frame. Feasibility studies may therefore substantially decrease the involved risk for the company and help to avoid misdirected investments that fail to deliver the expected results. CTI funding rates for this support measure are more flexible than for standard projects and can be adapted to the specific situation of the company (OPET, 2010b). The business partner is obliged to actively participate in the study and must be involved in the actual project after feasibility has been confirmed (OPET, 2010b).

4 R&D funding at the European level

4.1 General aspects

4.1.1 Europe as a research location

Although Europe as a whole is a well-established research location and host to a large number of top-level universities, research institutions, and innovative companies, the EU also faces major challenges in this respect, such as insufficient coordination of research policies and increasing global competition for talent (EC, 2007, pp. 5-6). Over the last few years, progress has been made towards improving the situation, most notably through the common objective to formally establish a European Research Area (ERA) that aims at the creation of a "[...] European ‘internal market’ for research, where researchers, technology and knowledge freely circulate [...]" (EC, 2007, p. 5).

The EU’s total R&D spending (i.e. including the private sector) was at 1.84% of GDP in 2006 (Wilén, 2008, p. 1; Bonse, 2010). As such, the Union was still far off the self-imposed 3% target defined by the Lisbon Strategy and to be reached by 2010 (Wilén, 2008, p. 1), and lags behind other areas of the world, such as the U.S. or Asia. In 2006, Japan invested 3.39%, South Korea 3.23% and the U.S. 2.61% of their GDP in research activities (Bonse, 2010). With regard to the distribution of R&D spending between the public and private sectors, the EU’s objective is to reach a total of two thirds of R&D expenditure being raised by the business sector (Wilén, 2008, p. 1). By 2005, this figure was at 54.6% (Wilén, 2008, p. 1).

4.1.2 Relevant EU research promoting instruments

At the EU level, there are two main public R&D promoting instruments with relevance to the topic of this thesis available: The Competitiveness and Innovation Framework Programme (CIP) and the Framework Programmes for Research and Technological Development (FPs) (EC, 2008, p. 5). The CIP offers about EUR 3.6 billion funding between 2007 and 2013 and specifically aims at promoting innovation activities of SMEs (EC, 2008, p. 47); however, Swiss organisations cannot or only under specific circumstances participate (EC, 2010b). As a result, chapter 4 will concentrate on the Framework Programmes, and particularly on the currently running 7th Framework Programme (FP7), as Switzerland has been taking part in the FPs since 1987 and Swiss organisations enjoy the full right of participation today (OECD, 2006, p. 68). In addition, EUREKA and EUREKA’s Eurostars programme will be introduced, two programmes that are open to Swiss organisations but not part of FP7.

illustration not visible in this excerpt

Table 3: EU Framework Programmes for Research and Technological Development, 1984 - 2013. Source: Artis and Nixson, 2007, p. 150.

The Framework Programmes were launched in 1984 and are the EU’s primary tool for promoting research in Europe by providing funding to "[...] co-finance research, technological development and demonstration projects [...]" (EC, 2008, p. 7) with the aim to "[...] strengthen the scientific and technological base of European industry and encouraging its international competitiveness, through research that supports EU policies" (EC, 2008, p. 39). Table 3 provides an overview of all seven FPs to date. As the data shows, the FPs’ budgets were increased after each FP, which clearly reflects their importance to European research policy. The largest budget increase was 63% (at 2006 price levels) from FP6 to FP7 (EC, 2006, p. 3).

4.1.3 SME specific issues

With respect to SMEs, about 99% of all companies in Europe fall into this category if measured by the criteria laid out by the EC (EC DG Research Communication Unit, 2010a, p. 6; EC, 2010h). As such, over 60 million jobs in the private sector are associated with SMEs, which equals a contribution of approximately two thirds to Europe’s GDP (EC DG Research Communication Unit, 2010a, p. 6; EC, 2010h). Consequently, SMEs are frequently important drivers of innovation, making them "[...] key to the implementation of the renewed Lisbon strategy for economic growth and employment" (EC, 2010h) and thus also "[...] key actors for the implementation of FP7" (EC, 2010k, p. 3).

SMEs represented the largest group of organisations participating in the thematic programmes of FP5 and FP6 if each organisation is counted only once, i.e. repeated participation by the same organisation is excluded (EC DG Research Communication Unit, 2010a, p. 14). In FP5 and FP6, 45% of the involved SMEs did not engage in R&D at all prior to their FP participation, and another 31% had a research budget, but no specific R&D department (EC DG Research Communication Unit, 2010b, p. 15). FP7 attaches even greater importance to the funding of R&D conducted by SMEs. In fact, the goal is to provide at least 15% of the total grants under the programme to SMEs (EC DG Research Communication Unit, 2010a, p. 7). Overall, participation of about 20,000 SMEs is expected by the end of FP7 in 2013 (EC DG Research SME Unit, 2010a, p. 1).

The following sub-chapters offer an overview of the most important funding opportunities at the European level for Swiss SMEs active in the field of renewable energy. As mentioned in chapter 3.1, the objective of chapters 3 and 4 is to present the key research areas of the various funding programmes, their goals, and the activities funded, in order to identify the most important benefits that companies can gain from participation. These benefits are subsequently summarised in chapter 5 and, in turn, form the basis of this thesis’ empirical research (in particular question 2 of the company survey).

4.2 7th Framework Programme for Research and Technological Development

With a budget of about EUR 53 billion over the period 2007 - 2013, FP7 is not only the most comprehensive of the EU’s Framework Programmes so far (see table 3), but is presently also the world’s largest public research funding scheme of its kind (Bonse, 2010). FP7 is organised in the four Specific Programmes "Cooperation", "Ideas", "People", and "Capacities." Table 4 depicts these Specific Programmes together with their priority areas and budgets. In addition, Euratom, the European Atomic Energy Community, and the Joint Research Centre (JRC), an independent Commission service that provides "[...] customer-driven scientific and technical support for the conception, development, implementation and monitoring of EU policies" (EC, 2010i) are also partly financed by FP7.

All activities funded under FP7 must have a "European added value" (EC, 2008, p. 39). In the case of collaborative research projects, this implies that all project consortia must include partners from at least two different EU Member States or other countries (EC, 2008, p. 39). Given that all other requirements for participation are fulfilled, any legal entity can participate in FP7 regardless of its geographical location (EC, 2008, p. 42; EC, 2010g, p. 7). However, organisations from EU Member States have special rights and funding access (EC, 2008, p. 42). So-called Associated Countries enjoy full rights in FP7. Switzerland is a fully Associated Country for most funding schemes under FP7 (EC, 2010g, p. 7), meaning that Swiss companies have the same rights to participation as institutions from EU Member Countries (Jakob, 2010, p. 17).


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Benefits and barriers of an enterprise's participation in publicly funded R&D projects. The example of Swiss enterprises in the field of renewable energy
Anglia Ruskin University  (FHNW University of Applied Sciences Basel (School of Business) & Anglia Ruskin University Cambridge (Ashcroft International Business School))
Focus: Renewable energy, public R&D funding, firm competitiveness
5.5 (Schweizer Notensystem)
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ISBN (eBook)
ISBN (Book)
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An engaged and methodologically very thoughtful empirical work. The paper's structure is systematic and the individual parts are nicely interwoven. The paper's methodology is sound, balanced and very well-documented. It is thoroughly rooted in state-of-the-art theoretical literature on firm competitiveness and combines quantitative and qualitative surveying. In addition, the thesis draws on many practical insights into R+D funding gained and contacts established during an internship at Zurich-based accelopment AG, which assists firms in accessing and managing public R+D funding.
renewable energy, solar energy, wind energy, geothermal energy, hydropower, firm competitiveness, SMEs, public funding, R&D funding, innovation funding, EU funding, FP7, Switzerland, Sustainability, R&D project, F&E, Erneuerbare Energien, Solarenergie, Windenergie, Geothermie, Wasserkraft, öffentliche Förderung, Forschungsförderung, EU Förderung, Projektfinanzierung
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MSc, MA Manuel Kaar (Author)Dr. Jeanette Müller (Author), 2011, Benefits and barriers of an enterprise's participation in publicly funded R&D projects. The example of Swiss enterprises in the field of renewable energy, Munich, GRIN Verlag,


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