Government funded R&D collaboration and it's impact on SME's business performance

Abstract

To assess the efficiency of government policies promoting open R&D innovation of Korea, this study examined whether R&D collaborations positively affect the business performances of SMEs that participate in joint R&D projects. To fulfill this objective, we employed a propensity score matching method to analyze and compare the business performance of a group of SMEs that participated in a government-supported joint R&D project and a group that did not. For determining whether or not SMEs have carried out a joint R&D project, ‘Government R&D Survey and Analysis data’ of Korea government from years 2008 to 2010 were used to gather the information. For the business performance, we used financial data of each company gathered by NICE, a private information service company, from the years 2010 to 2014. As a result of this study, although it had no significant impact on subsequent business performance such as business profit and net profit, it was found that the government investment for joint R&D contributed to the improvement of short-term business performance such as sales and assets of companies participating in joint R&D projects supported by the government. However, in terms of long-term business performance, there were no significant differences between the SMEs that completed a joint R&D project and SMEs that did not. This suggests that the subsidies provided by the Korean government to SMEs to promote joint R&D were not being utilized for technological innovations and internalization of knowledge, and government-funded joint R&D could be used to produce products and installations rather than increase profitability based on high-value-added technologies. In conclusion, to achieve the government policy goal of technological innovation of SMEs through joint research, it is necessary to change the R&D policy direction such as the simple funding investment that has been promoted so far.