Speaker
Description
Small and medium-sized enterprises (SMEs) are the backbone of the European economy, accounting for over 99% of all businesses and generating around two-thirds of total private sector employment (European Commission, 2023). Yet, despite their strategic importance, SMEs often struggle to adopt innovation, particularly in navigating digital transformation and the green transition. Traditional policy instruments—such as grants, tax incentives, and advisory services—have had reported mixed results in bridging this innovation gap (OECD, 2021). This paper argues that integrating behavioral economics into EU-level SME support programs might unlock underused potential by addressing psychological and cognitive barriers that constrain entrepreneurial decision-making.
Building on Thaler and Sunstein’s (2008) concept of “nudging,” we explore how behavioral biases—such as loss aversion, complexity avoidance, and present bias— might limit SME engagement with innovation policies. For instance, “if complexity causes confusion, confusion can cause inaction” (Thaler, 2015: p. 111), a pattern evident in multi-stage EU application procedures. We assess how EU programs such as Horizon Europe, the Single Market Programme, and correspondingly the European Innovation Council (EIC) incorporate—or fail to incorporate—behavioral insights in their design and delivery.
Using a qualitative comparative approach, we analyze how Romania, the Netherlands, and Germany have implemented SME innovation support, focusing on behavioral levers such as simplification, framing, and timing. From a methodological point of view, your paper combines policy document analysis with behavioral mapping. Preliminary findings show that while some national programs (e.g., Dutch innovation vouchers) implicitly apply behavioral principles, most EU-level schemes remain administratively burdensome and cognitively taxing (European Court of Auditors, 2023).
For example, Romania’s innovation funding architecture often lacks clear guidance and imposes heavy procedural loads, discouraging smaller firms from applying. In contrast, the Netherlands has piloted voucher-based programs that “nudge” SMEs by reducing upfront commitments and using simple language to frame value propositions (Nesta, 2020).
The paper concludes with a set of policy recommendations designed such as to better facilitate the integration of behavioral insights into EU SME support. These include the use of simplified digital platforms, personalized nudges, default-based program opt-ins, and behaviorally-informed outreach strategies. We consider that by redesigning choice environments, policymakers can significantly increase SME participation and improve innovation outcomes across the EU.
