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“Eurostars 2”: Support for research intensive SMEs to continue under Horizon 2020

On 10 July 2013, the Commission adopted the Innovation Investment Package, a EUR 22 billion investment in research performed by and through industry. This package consists of European Commission proposals for the participation of the EU in five public-private partnerships (better known as Joint Technology Initiatives) and four public-public partnerships (better known as Joint Programme Initiatives).

In practice, a EUR 8 billion investment from Horizon 2020, the next EU research and innovation programme, will secure about EUR 10 billion from industry and almost EUR 4 billion from EU Member States (MS).

The Eurostars Joint Programme (2014-2020) or “Eurostars-2”, is one of the four public-public partnerships undertaken with MS. With its strong focus on transnational collaboration of highly research intensive SMEs, it is perfectly in line with the overall EU strategy to boost the competitiveness of European industry through collaborative international research, and Horizon 2020’s objective to stimulate growth and job creation by means of increasing SME innovation levels. However, the added value of “Eurostars-2” does not only lie in the special type of SMEs that are supported, (i.e. research intensive SMEs), but also in the way this support is implemented: Eurostars is a joint programme between several MS and associated countries in the context of EUREKA, and the EU (through H2020). This makes Eurostars fully part of the integrated approach to assist SMEs under Horizon 2020, as it will complement support provided under the SME instrument and through participation in collaborative projects.

The objective of “Eurostars-2” is to support research-performing SMEs by co-financing their market-oriented transnational research in a bottom-up manner and by providing them with a legal and organisational framework. Having a dynamic segment of R&D performing SMEs is essential for the overall economy. They are able to stimulate healthy technological competition in the market by offering alternative solutions to those proposed by large industry, or even coming up with innovative solutions for entirely new problems.

Some of these companies are expected to grow rapidly to become the large firms of tomorrow, while others play an important role by driving innovation in value chains and/or in existing large firms. Yet for innovative SMEs, their small size and flexible organisation may prove to be a significant advantage in the changing economic landscape, enabling them to adapt quickly, and in so doing, seize new market opportunities. These SMEs can make a very important contribution towards the conversion of science and new technology into innovative products, processes and services, thus contributing to the Lisbon Strategy for economic growth and more and better jobs, and its successor Europe 2020 Strategy.

EU involvement in Eurostars is not only targeted at reducing barriers for research intensive SMEs, but also to strengthen the joint programme structure, featuring scientific, management and financial integration of national programmes.

As such, “Eurostars-2” aims at increasing the accessibility, efficiency and efficacy of public funding for R&D performing SMEs in Europe by aligning, harmonising and synchronising the national funding mechanisms also through promoting policy learning between participating MS. It will therefore: ensure excellence and impact of the projects selected through international (EUREKA-wide) competition and the application of a single evaluation and selection process; further improve operational excellence and accountability for the programme by reducing the time to contract while maintaining an optimal frequency of yearly calls; ensure a critical mass of support for SMEs succeeding in the evaluation process; facilitate the participation of R&D performing SMEs without previous experience in transnational R&D activities.

“Eurostars-2” therefore offers the unique combination of centralised management (for which a dedicated implementation structure is already in place, the EUREKA Secretariat) with decentralised funding and project follow-up at national level.

While MS are the "founders" of the programme, the EU's role and contribution is key for the alignment and synchronisation of the relevant national research and innovation programmes for a more effective use of available resources.

By pooling together national resources otherwise scattered along different national programmes and often lacking interoperability, “Eurostars-2” will contribute to the achievement of the European Research Area (ERA) and to European competitiveness, job creation, economic change and sustainable development in line with the Europe 2020 objectives.

This not in the least because EU involvement is adding a clear leverage effect to investments at national level. Current data from EUREKA on the first Eurostars programme (2008-2013) or “Eurostars-1” point to a substantial leverage effect, with EUR 100 million EU funds leveraging EUR 400 million national funds (EUR 100 million more than initially foreseen by MS), and raising private co-financing to EUR 500 million. “Eurostars-2” is meant to lead to the same leverage ratio, but with a higher investment as a starting point.

For “Eurostars-2”, the budget will be significantly higher than “Eurostars-1”. Given the intense interest in SMEs raised by the programme and the interest from Eurostars countries, the Commission intends to triple its contribution (EUR 287 million). In order to enhance “Eurostars-2” and to support a greater number of research and development performing SMEs with growth potential, MS are committed to substantially increasing its volume. This responds to SME’s increasing demand from when the programme first started and reflects the absorption capacity of the “Eurostars-2” target group. Consequently, the EU financial contribution has been increased in view of this.

Eurostars has been attracting an increasing number of applications over the years. This has led the Eurostars countries to invest even more money than what was initially committed at the programme’s start (from EUR 300 to 400 million), and to fund around 800 projects during the programme’s five-year duration. Such an injection of funds is an indicator of the clear benefit it brings to participating countries.

More than 70% of Eurostars project applicants are R&D SMEs and SMEs, accounting for approximately 63% and 9%, respectively. The main partner of any Eurostars consortium must be an R&D SME in order to satisfy the Eurostars eligibility criteria. Consortiums are typically set up with R&D SMEs, SMEs, and research institutes and universities. At least 50% of the total project costs related to R&D activities must be carried out by the participating R&D-performing SME(s); however, this percentage can include minor contracting. The new or improved product, process or service is meant to reach the market in two years from the end of the project.

The bottom-up approach of “Eurostars-2” enables participants to launch their projects in any technological and market sector as long as it has a civilian purpose and is aimed at the production of a new product, process or service.

The Commission's proposal for “Eurostars-2” is currently on the table of the Council and Parliament for the co-decision. The first call under the new programme is expected in the first quarter of 2014.