Horizon 2020: Stimulating SME research and innovation

Clara de la TORRE

SMEs are to have a pivotal role in achieving the overall objectives of Horizon 2020, the forthcoming framework programme for research and innovation (R&I) in the EU. To facilitate this role, a dedicated instrument will be set up to strengthen the innovative capacity of SMEs in order to boost their competitiveness in European and global markets and to promote company growth.

Set to launch in 2014, Horizon 2020's objectives are to maximise the contribution of EU-funded R&I to rediscover a path for sustainable growth and to confront the challenges facing Europe. Part of its strategy is to enable SMEs to benefit more from EU funding and to improve the conditions and access to finance for innovation. SMEs will benefit from around EUR 8.6 billion, recognising their critical role in innovation. Around 15% (EUR 6.8 billion) of the total combined budget assigned to societal challenges and industrial technologies is to go to SMEs. In addition, a specific action will promote SMEs involved in research and development, building on the Eurostars Joint Programme. Finally, it is estimated that around 30% of the financial instruments will target SMEs (approximately EUR 1.2 billion).

'We have developed this new programme for R&I to make a quality jump by reaching more SMEs and by generating more impact to ensure that innovative ideas can be turned into products and services that create jobs,' says Clara de la Torre, Director Research and Innovation at the Directorate-General for Research and Innovation. She maintains that by encouraging SMEs to invest in R&I, they can create new business opportunities in Europe and beyond, and contribute to finding solutions to key societal challenges. Highly innovative companies are vital if Europe is to become a knowledge-based economy with sustained growth and high-quality jobs.

The new dedicated SME instrument will encourage SMEs to put forward innovative ideas which demonstrate a clear EU dimension. 'We want to put SMEs in the driver's seat, to lead a project,' emphasises Ms de la Torre. 'A bottom-up approach for funding is required because SMEs usually come up with new ideas that offer combined elements from different actors and technologies. Therefore, we want to be very open; they can come up with any idea, as long as it is highly innovative and addresses Union challenges.' The SME instrument is designed to stimulate all kinds of innovative companies, regardless of type, research capability or sector.

Project support from start to finish

'SMEs will be provided with staged support covering the entire innovation cycle, in order to bring ideas to market introduction,' says Ms de la Torre. This support is structured in three phases, resembling that of the American Small Business Innovation Research (SBIR) programme.

The feasibility phase lasts six to 12 months, and offers a grant in the form of a lump sum for an SME to explore the viability of a concept, both in terms of its technological merit and commercial potential.

This feasibility report can then be used to apply for funding in the second phase which supports research and development, but notably also demonstration activities and market replication. The duration is one to two years, and it is also financed by a grant. 'It is hoped that the successful evaluation of an SME project at the end of this phase will enable such a project to then apply for private funding,' Ms de la Torre states.

The commercialisation phase will be supported by financial instruments as well as offer innovation support services. Successful results achieved in one phase enable an SME to proceed to the next; however, SMEs are eligible to participate in any stage.

Horizon 2020 plans to utilise the Enterprise Europe Network (EEN) to enable companies to increase their innovation capacity and benefit fully from the instrument, thus creating a true one-stop shop for SMEs. 'EEN has extensive experience in helping SMEs access R&I funding at EU level and in advising them on technology and knowledge transfer, as well as partnering services,' affirms Ms de la Torre. By upgrading existing EEN services, SMEs should be able to benefit from mentoring and coaching throughout the life cycle of an innovation project, get assistance to pursue commercialisation activities, and also use networking channels to find partners across Europe and beyond.

Less burden, more simplification

EU funding for R&I has a much greater impact if needless red tape is cut out and participation is made simpler. Ms de la Torre stresses that the dedicated instrument aims to set forth simple rules and administrative procedures adapted to the needs of small companies: 'The objective is to ensure that implementation is as simple and straightforward as possible, in addition to allowing a short time to contract and a small administrative burden.'

To eliminate fragmentation, Horizon 2020 seeks to bring together SME support that is spread across several programmes and initiatives for the period 2007-2013 (e.g. the Seventh Framework Programme (FP7) and the Competitiveness and Innovation Framework Programme (CIP)) by providing one comprehensive but simple scheme.

The road ahead

Ms de la Torre says that one challenge for Horizon 2020 will be spreading the word to SMEs: 'SMEs often tell us that they are not well enough informed about EU funding and procedures. Therefore it is an important task to make this new instrument known among SMEs so as to maximise their involvement.' However, Horizon 2020 and its SME strategy will first have to be approved by the Council and the European Parliament on the basis of the Commission proposal.

News and Events:

Demonstration activity: Bringing research results to the market

News & Events

The 2012 FP7 Capacities work programme 'Research for the benefit of SMEs' aims to strengthen the research and innovation capacities of European SMEs. It is aimed at those SMEs which have little or no research capability to turn innovative ideas into products and services with clear future market potential.

Demonstration activities are funding packages designed to bridge the gap between research and the market. They do this by aiming to prove the viability of a new solution that offers a potential economic advantage but which cannot be commercialised directly as further technological or other developments are required.

'A demonstration activity is a follow-up to a successful FP7 'Research for SMEs' or 'Research for SME associations' project as SMEs often need to follow through on research projects with work linked to a kind of demonstration action before actually commercialising products and services,' says Corinna Amting, head of the SME Actions Unit at the Research Executive Agency.

This activity helps participating SMEs to increase the impact of their projects or to explore new ways of using the acquired knowledge from their FP7 'Research for SMEs' or 'Research for SME associations' project, the two distinct schemes which constitute the core activities of 'Research for the benefit of SMEs'. The former scheme directly supports SMEs in the project to outsource their research activities while the latter indirectly supports SMEs through their associations/groupings to outsource research activities.

Participants have to demonstrate in their project proposal firstly that the research results which lead to the demonstration activity originate from these two schemes within the Capacities programme and secondly that these results are ready and suitable for the exploitation phase via the demonstration project.

Paving the way for research and innovation production

Ms Amting stresses the importance of the last development stage before products or processes enter production: 'The purpose is really to bridge the end of a research phase with the two or three years that it takes to make their products ready for the market, as research studies show. SMEs have the opportunity in this critical phase to make the final steps to bring their products to the market and reap the economic benefits.'

However, funding can pose a significant challenge to moving forward at this stage: 'What we fund overall is innovation for SMEs. The contribution for demonstration activities is up to 50% of the total eligible costs and 100% for management and other activities.'

Demonstration projects must be centred on the needs of SMEs to carry out demonstration activities before being able to enter the market. Such activities include: testing prototypes; scale-up studies; performance verification and implementation of new technological and non-technological solutions; detailed market studies; and business plans. There are no thematic restrictions; projects may address the entire field of science and technology. However, these projects are not meant for further research and development activities.

A demonstration activity is a bottom-up scheme in which SMEs that have participated in an FP7 'Research for SMEs' or 'Research for SME associations' project build the core of an international consortium. Ms Amting points out, SMEs own these project results and can use them to market new products and services, as well as commercially exploiting their intellectual property rights (IPR).

SMEs: Proving their market worth

The demonstration action only targets SMEs that have participated or continue to participate in a 'Research for SMEs' or a 'Research for SME associations' project. The objective is to guarantee that the benefits of supporting demonstration activities will go directly to the SMEs involved in such projects and which are ready to fully exploit the results. Thus the SME consortium needs to show that the results of the demonstration activity are ready and suitable for exploitation in order to receive the funding.

'Partners from previous SME projects are now asked to work together again,' says Ms Amting. 'There has to be a successful outcome from the previous SME or SME association project, a process or a product that can be brought to market. The SMEs decide which part of their prior research project outcome is worth bringing to the market; therefore the focus is on achieving this because there may be two or three results owned by different SMEs from the former SME or SME association project.'

The expected impact of the research should be clearly delineated both at qualitative and quantitative levels, providing an indication of the expected economic impact on turnover, employment or target markets, as well as expected patent applications or licence agreements. Ms Amting explains that it is therefore necessary for each demonstration activity to include a convincing business case on how investment in this demonstration action will lead to a clear benefit for SMEs: 'You have to establish what your factor for success and innovation will be.'

Evaluators of the funding applications are instructed to assess the project's needs from concept to exploitation, thus helping to provide strong guarantees that the needs and ambitions of SMEs will be reconciled from the outset. Ms Amting stresses that a demonstration activity should show a clear route to exploitation and commercialisation.

There are minimum conditions for participating in a demonstration activity. The consortium must include at least three independent legal entities, each one of which is established in a Member State (MS) or an Associated Country (AC), and no two of which are established in the same MS or AC. At least two of the three must be SMEs that have participated together in a successful SME or SME association project that has finished or is in its last year of operation.

The indicative budget for 2012 is EUR 20 million. The overall budget of a project normally ranges from EUR 500 000 to EUR 3 million. The typical duration is 18 to 24 months.

The next call for a demonstration activity is July 2012. For updates on the upcoming call for proposals, please check here.

Success Stories:

Reinventing the running shoe

Success Stories

Researchers have developed a heel-less running shoe that improves posture, walking and running performances. The patented technology, a shock-absorbing sole plate which replaces the heel, was made possible thanks to EU funding which targets SMEs.

What makes the running shoe highly innovative is that its outer sole does not have a heel. A sole plate, which is incorporated under the middle part of the foot, replaces the padded heel of traditional running shoes. Ciro Maddaloni, a project officer at the Research Executive Agency who provided monitoring and tutoring activities for the HEELLESS initiative from 2008 to 2010, explains that this reduces impact on the heel, which means that the force goes through the middle of the foot, putting less stress on the knee and ankle. This is in stark contrast to conventional running shoes which lessen the impact on the heel of the foot by cushioning it.

SME research funding scheme off and running

The HEELLESS project was led by Mr Adri Hartveld, the founder and managing director of UK-based Healus Technology and a physiotherapist. He developed the innovative design, and brought together five research partners from Germany, the Netherlands and the UK. The research consortium received EUR 1.02 million in grant funding under the Seventh Framework Programme (FP7) 'Research for the benefit of SMEs' theme, which aims to strengthen the innovation capacity of European SMEs and their contribution to the development of new technology-based products and markets. The funding enabled the consortium to carry out activities spread over two years on polymer material development, shoe prototype development, kinematic and biomechanical analyses, evaluations and test trials, as well as the dissemination, technology transfer and exploitation of results.

According to Mr Maddaloni, the EU funding instrument helped the consortium to overcome the biggest research hurdles: identifying the right polymer and defining the shape of the sole. 'Mr Hartveld didn't have the financial means to contract a producer to develop a new polymer for the shoe or to commission an independent organisation to perform biomechanical tests.'

The project culminated in mid-2010 following the successful completion of the patented sole technology with its unique material characteristics.

Lace up and reap the rewards

Unlike its more traditional counterpart, this lightweight shoe alleviates the impact force when the foot strikes the ground during running or brisk walking. By greatly enhancing shock absorption, it reduces the repetitive stresses and strains on joints that often lead to injuries associated with this type of activity. Mr Maddaloni says that the sole's unique localised rigidity permits and directs the full natural movement of walking and running. He further explains that the shoe promotes correct alignment of the human body: 'It gives the possibility to better balance your weight and posture, to stand, to walk and to run better and faster to actually use the body in a more correct manner than before.'

In addition to the gains for serious runners and competitive athletes, Mr Maddaloni sees the benefits of the shoe for the entire fitness market. 'Athletes can better take advantage of these shoes, but it is true that they can be used by everyone, for example by casual walkers and joggers, to improve walking or running efficiency. These are leisure shoes, so regardless of whether you walk or run a lot, they should help.'

The shoe also provides a number of auxiliary benefits, such as the feel-good factor created when general performance is enhanced, the increased confidence when running or jogging well and the higher comfort level due to less overall body strain.

Hit the ground running with marketing

Mr Maddaloni says that the shoe has now entered into the industrialisation phase where the objective is market exploitation of the patent: 'The consortium is trying to find investors, looking for people that are interested in production.'

He stresses that the challenges are two-fold: to identify a shoes producer that wants to use the patent and to persuade sports shoe companies to commit to this highly innovative running shoe concept.

Facts & Figures:

SME targeted measures stepped up as FP7 funding target comes in reach

Facts & Figures

Current figures show that funding levels for SMEs will soon reach the target figure of 15% of the total EU funding budget. Due to SME strengthening measures, this target will be surpassed in early 2012, and the funding level is expected to be close to 16% by the end of the Seventh Framework Programme (FP7) in 2013.

In January 2012, a report on the participation of SMEs in the five first years of FP7 (2007-2011) will be published. FP7 is the EU's main instrument for funding research in Europe for the period 2007-2013.

The regular SME progress reports, which are published by the Directorate-General for Research and Innovation, set out to examine the participation of SMEs in the thematic priorities of the Cooperation programme under FP7. The Cooperation programme supports all types of research activities carried out by different research bodies in trans-national cooperation and aims to gain or consolidate leadership in key scientific and technology areas.

Lieve Van Woensel, policy officer for the SME Unit at the Directorate-General for Research and Innovation, is highly encouraged by the progress achieved. She says that the recent increase in the SME funding level is the result of SME targeted measures in the 2011 Work Programmes (WPs): 'The WPs contain a lot of additional SME-friendly measures for example SME-specific topics and calls, earmarked budgets for SMEs for the thematic priorities so this is why we are attracting a higher participation.'

She gives her overall impressions of SMEs based on the figures and findings as of 1 December 2011: 'They learn from the best practice scenarios and success stories of other SMEs that have carried out projects in the thematic priorities.'

Ms Van Woensel explains that some of the themes, due to their nature, attract more or fewer SMEs. For instance, she says: 'SEC, which covers security research, attracts young high tech SMEs. Others, like SSH, which comprises research on socio-economic issues, are not relevant for direct financial support to SMEs.'

Furthermore, it is evident that in the end more SMEs will benefit from the results of research projects than those being directly funded. For instance, in the KBBE research, which covers the domain of food, agriculture, fisheries and biotechnology, many SMEs already profit from the results of previous projects. And as another example, some ICT projects provide technology access services that are primarily targeted at SMEs, as clients of the services.

SME participation in FP7 and the Cooperation programme

In FP7 overall, including 'Research for the benefit of SMEs' and the Marie Curie Actions, almost 13 000 of the participations are by SMEs, receiving an average EU contribution of EUR 250 000.

Up to 17 500 unique SMEs with approximately 28 000 SME participations are expected to benefit from FP7 by 2013. This estimation is based on the average multiple participations by SMEs in FP7, which has increased to an average of 1.6 Grant Agreements (GAs) per SME, demonstrating a positive trend in the interest of SMEs in FP7.

According to the latest statistics, by 1 December 2011 more than 8 000 SME participants in the 10 thematic priorities had received in total over EUR 2.2 billion, with an average EU contribution of EUR 270 000.

As of late 2011, the Cooperation programme has spent in total EUR 14.9 billion (46% of its total budget). From the remaining budget (54% or EUR 17.45 billion), at least EUR 2.65 billion should be allocated to SMEs in order to reach the 15% target for the whole period, amounting to a total contribution of EUR 4.84 billion for SMEs. Including the other specific programmes, EUR 6 billion is expected to go to SMEs.

Ms Van Woensel attributes the significant increase in the budget share for SMEs in 2011 to the SME strengthening measures in the respective WPs. Given the SME targeted elements in the 2012 and 2013 WPs, the budgetary share of SMEs is forecasted to grow to about 16% of the Cooperation programme, thus exceeding the 15% target laid down in FP7 legislation.

Participation in FP7 specific programmes

The five FP7 specific programmes (Cooperation, Ideas, People, Capacities and Euratom) have between them about:

  • 74 000 participations;
  • 12 600 SME participations;
  • 8 200 unique SMEs.

On average, SMEs participate in 1.6 GAs in FP7. 'Once SMEs become active in one European project, they seem to be more easily motivated to participate in another,' says Ms Van Woensel. An indicative example of this tendency is SMEs that participate in both the Cooperation and Capacities programmes.

SME activity profiles within FP7

For the purposes of the analysis of SME profiles participating in FP7, SMEs were grouped into six main sectors of activity, based upon the SMEs' NACE codes (the standard EU classification system for core business activity):

  • Research and development (R&D);
  • Manufacturing;
  • ICT (computer and related activities, including telecommunications);
  • Services (all service activities except consultancy services, e.g. wholesale and retail trade; repair of motor vehicles, motorcycles, ships and personal and household goods; electricity, gas and water supply; real estate and renting activities);
  • Consultancy;
  • Quaternary (education and health service SMEs).

Within the 10 thematic priorities (see Table 1), R&D represents close to a third (29%) of all SME activity in the Cooperation programme, followed by the service sector at about a quarter (Graph 1). The ICT and manufacturing sectors account for an almost equal share with 20% and 19%, respectively.

Graph 1: SME sectors represented in the Cooperation programme

Theme acronym Theme description
HEALTH Health research
KBBE Food, agriculture, fisheries and biotechnology
ICT Information and communication technologies
NMP Nanosciences, nanotechnologies, materials and production technologies
ENERGY Energy research
ENV Environment research (including climate change)
TPT Transport research (including aeronautics)
SSH Socio-economic sciences and humanities research
SPA Space research
SEC Security research

Table 1: The 10 Cooperation programme thematic priorities: Acronym and description

The division of participations from different sectors of activity was analysed across the different thematic priorities (Graph 2):

  • R&D: R&D SMEs, which together account for 29% of all SME participations across the 10 thematic priorities, are present in all of them. They are most commonly present (between 30 and 60% of the participations) in the themes of SSH, HEALTH, KBBE, ENV, ENERGY, SPA and TPT.
  • Manufacturing: The Manufacturing sector is highly active in the NMP theme (41%). However, manufacturing SMEs are active in all the themes, with a total share of 19% of participations.
  • ICT: Besides a very high share of SMEs in the ICT theme (43%), the ICT sector also has a substantial presence in the SEC (30%). Only in the SSH and ENERGY themes are ICT SMEs not very active. On average, 20% of the SMEs are from the ICT sector.
  • Services: The Services sector, which contributes 24% of the participations, is very active in all the themes (between 17 and 41%), and most particularly in SPA, SEC, ENV and ENERGY.
  • Consultancy: With an overall participation of 6%, SMEs in the Consultancy sector are less active.
  • Quaternary: SMEs in the Quaternary sector accounts only for 2% of the participations, but in the HEALTH and SSH themes, they account for more than 6%.

Graph 2: Overview of the sectors represented in SME participations by theme