Phase-Zero Funding: a Specially Tailored Instrument to Promote First-Time Collaboration between SMEs and Universities

Alejandra Alvaredo
Manuel Sadosky Foundation

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Abstract
Introduction
It is well known that the propensity of small- and medium-sized enterprises (SMEs) to innovate is lower than for large companies since SMEs usually face higher barriers on capital and labour markets and thus lack the funding, skilled human resources, and expert knowledge required to pursue innovative activities.
Collaboration with universities can help SMEs solve their labour and knowledge access problems by sharing skills, equipment and experience with research groups. Universities also benefit from collaborative research as interaction with industry boosts the commercialization of their results as well as the relevance of their research. For both parties, collaborative research may contribute to overcoming lack of funding because of the multiple grants and subsidies that are available for the promotion of joint research and innovation projects.
However, many barriers hamper University-Industry collaboration, as for instance a mismatch between research offerings and innovation demands from industry or disparate expectations with respect to the creation and use of new knowledge. Additionally, the process of finding the right partners and negotiating collaboration agreements can pose SMEs a too high hurdle to overcome.
In view of these important barriers, SME-University collaboration is frequently supported by public policies aimed at increasing firms’ incentives to innovation and universities’ involvement in knowledge transfer. But more often than not, the allocated funding remains under-executed because the instruments are not designed and implemented on the basis of an accurate, holistic diagnose of the difficulties they should help overcome but instead focus on the financial aspects of the problem only.
In this paper, the design and implementation of a new instrument aimed at promoting first-time collaboration projects between academic research groups and SMEs from the ICT sector in Argentina are presented. The rationale for its main features as a consequence of previous liaison experiences from the funding office, as well as the outputs and preliminary impact obtained as a result of the first projects financed with the instrument, are also outlined.
Phase-Zero Funding: Rationale and Features
The liaison activities from the funding office -the University-Industry Liaison Area at the Manuel Sadosky Foundation- that served as a basis for the design of the new funding instrument consisted of a series of 14 University-Industry meetups devoted to ICT-specific subjects (see Alvaredo and Rossaro, 2015) and the support provided to 10 pilot SME-University projects that resulted from such meetups. These activities, which spanned over a period of 4 years, allowed the funding office to establish direct contact with hundreds of actors from the local ICT ecosystem, i.e. with hundreds of representatives from research groups and SMEs, and thus get acquainted with their major concerns about collaboration.
The main conclusions on how to understand and boost first-time collaboration that were drawn from the above mentioned laison activities can be summarized as follows:
• The first problem to be aware of is the lack of priority that technological innovation and, as a consequence thereof, collaborative research have in the daily, short-term oriented business of most SMEs.
• First-time collaboration experiences constitute a turning point in the propensity of both parties towards further collaboration, and this is independent of the magnitude and innovative intensity of the first collaborative projects.
• Grants for collaborative research and innovation are important incentives for both SMEs and universities, but the conditions for funding must be very strict in terms of the expected dedication of skilled human resources from both parties along the whole project duration.
• All documents and processes involved in the application, evaluation, formalization, and execution of first-time collaboration projects must be kept as concise and simple as possible.
As a result of the above mentioned conclusions, it was decided that the Phase-Zero Funding should present the following features:
• First-time collaboration projects only.
• Short projects (less than 6 months duration).
• Modest funding (about 10% of other available grants).
• Grants for direct costs only (no financing of project team resources).
• Neither priority themes nor degree of novelty or complexity specified.
• Balanced composition of project team and dedication of both parties compulsory.
• Expected results: proofs of concept or prototypes, to be further developed by new funding.

Main results so far
• 3 calls in 18 months
• 23 projects approved out of 44 submittals
• wide variety of themes and innovative intensity of the projects
• wide variety of geographic origin of project teams
• 31% of beneficiaries from universities or SMEs got more than one project approved, either in the same or in subsequent calls

Preliminary conclusions
The paramount conclusion is that the Phase-Zero Funding was a clear success. Not only did the allocated funding not remain under-executed, but the number, quality, and variety of the applications exceeded expectations. Furthermore, almost one third of the beneficiaries decided to embark in further first-time collaboration experiences with other partners.
The main reasons for this success were, on the one hand, the instrument design together with the support provided to the participants along the whole process and, on the other, the confidence the funding office had already gained among the target beneficiaries, i.e. research groups and SMEs from the ICT sector of Argentina.
So far, the execution of the projects has evolved in a timely, positive fashion, with clear improvements noticeable upon subsequent project stages. As for the further development of the obtained results until its final adoption by the participating SMEs, its concretion will no doubt require extra involvement and probably also additional, specially tailored funding.