Governments across Europe face a dilemma: how to justify long-term innovation spending when results are expected quickly. A new longitudinal study from Finland shows that public research, development and innovation (RDI) subsidies can play a meaningful role in helping companies develop significant innovations, but the returns build gradually. The study offers timely evidence to national and international discussions on how governments can effectively support innovation-driven growth and competitiveness.
Examining public innovation grants in Finland across multiple support programmes over 22 years, the study found that the benefits of funding are typically not immediate. Instead, effects grow gradually and peak roughly five to eight years after companies first receive support. Firms receiving RDI grants were, on average, more likely to commercialise meaningful, industry-recognised innovations than comparable firms without such support.
The researchers also observed persistent positive effects on patenting activity.
"Significant innovations often require years of development before reaching the market. Our findings show that funding continuity can be fruitful, but evaluation frameworks must allow for sufficiently long time horizons. The long development cycles should be reflected in policy instruments and evaluation practices", says assistant professor Robert van der Have from the University of Oulu.
The researchers’ models suggest that, over the study period, the Finnish RDI subsidy system may have helped generate dozens of additional significant commercialised innovations and close to 10,000 additional patented inventions.
With its emphasis on significant and commercialized innovations, the publication of the study is timely for Finnish domestic policy discussions. Finland's Research and Innovation Council has called for more strategic approaches to RDI, emphasising commercialisation and the need to broaden which sectors and companies engage in R&D.
The state has also begun to systematically monitor and assess the impact of R&D investments and the achievement of objectives.
Urge to increase funding that demonstrates value for money
According to van der Have, European policymakers are under growing pressure to both increase investment in innovation and demonstrate tangible results from public spending.
”The report by Mario Draghi on the future of European competitiveness calls for a major boost in EU research and innovation funding, highlighting the need to meet and exceed long-standing investment targets to remain globally competitive. In response, the European Commission launched its Competitiveness Compass in January 2025, identifying closing the innovation gap as one of three key priorities for driving economic growth. The European Parliament further reinforces that direction”, van der Have says.
An unusually large study
The observational study is unusually large in both scale and time span, covering 219,477 Finnish firms and 2,349 significant innovations between 1997 and 2018. The innovations were drawn from SFINNO, a unique, editorially curated archive of commercially introduced Finnish innovations compiled by VTT Technical Research Centre of Finland over three decades.
To approximate the effect of receiving a grant as closely as possible, the researchers used a generalised synthetic control method that goes beyond simply comparing subsidised and unsubsidised firms. The approach builds a counterfactual from control firms with closely matching pre-funding performance histories, accounting for the fact that grant recipients are not a random cross-section of Finnish businesses.
Results were compared and broadly validated using an alternative difference-in-differences estimation technique, as well as by using granted patent counts as an alternative measure of innovative output.
More information
Publication: Robert van der Have and Matthias Deschryvere (2026): Temporal dynamic effects of public innovation subsidies on firms' significant innovation outcomes. Industrial and Corporate Change, Oxford University Press. https://doi.org/10.1093/icc/dtag027
The Draghi report on EU competitiveness
Competitiveness compass - European Commission