Handful of multinationals snatch up innovation subsidies

Flemish minister for innovation Ingrid Lieten SP.A yesterday responded to a question raised by the Flemish MP Lode Vereeck LDD about the distribution of subsidies by one of the biggest subsidizing agencies in Flanders, the Institute for the Promotion of Innovation through Science and Technology IWT. Judging from Lieten’s figures, the 63.4 million euros received by the ten biggest beneficiaries in 2011 constituted 59% of all the business support released for research and development during the same year. “It’s no coincidence,” says Veerle Lories, administrator-general of the IWT. “These are businesses that allocate substantial research budgets. The co-financing system also increases the amounts that we supplement.”
It’s significant to note however that employment among these champions of innovation has meanwhile dropped from 25,667 jobs in 2003 to 19,027 in 2011, with Philips and Alcatel-Lucent shrinking their staff by more than 50%. These are classic examples of multinationals that have been systematically phasing out their production divisions in Flanders and Belgium over the past few years. IWT’s own analysis of 384 completed research and development projects dating back to 2007 indicates that 77% of the allocated support was received by major companies, and that from a global perspective employment and added value among these multinationals had dropped. “But it’s more complicated than that,” Lories explains, saying: “Innovation can stimulate the economy and create employment elsewhere. And the question remains whether the companies on the list would not have cut back their activities in Flanders even more if they did not receive the subsidies.” According to minister Lieten, “employment is only one aspect of innovation; it is crucial for a knowledge economy like ours. How else will we find alternative energy sources? And how will we secure innovations in the healthcare sector to absorb the ageing population?” She further points to the indirect effect on employment opportunities, with innovation often resulting in a new ‘ecosystem’ of activities which also benefit the suppliers.
Verveeck nevertheless believes the figures indicate a need for an amended policy, saying: “In view of the major job shedding among these multinationals in the past few years, the IWT should shift its focus for support to small and medium enterprises. This is where most potential for job creation can be found.” According to Lories, the IWT has been hard at work to drop the bar so that SMEs can also apply. “But its effect is not yet reflected in these figures,” he adds. Lieten has promised to approach this group more proactively in future.