Building a bridge over the valley of death? New pathways for innovation policy in structurally weak regions

Björn Alecke, Timo Mitze*, Annekatrin Niebuhr

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review


We investigate if a regional policy shift by the federal state government of Saxony in 2007 enhanced the innovation performance of local SMEs compared to similar firms in other East German regions. From the perspective of innovation policy, the policy shift in Saxony is remarkable for its novel approach to overcome the so-called “valley of death” for innovative SMEs, which addresses the difficult transition from a scientific invention to its successful commercial exploitation. While public support to the design and development of market-ready new products and services together with their market launch is typically highly restricted by EU state aid law, Saxony’s novel innovation policy makes use of the EU’s de minimis principle. This principle permits unconditional public funding up to EUR 200,000 over three tax years. While such amounts cannot be expected to provide additional incentives for larger firms, however, de minimis-based funding may be an essential tool to foster innovation activities in SMEs. Our regional benchmarking approach based on micro data from the IAB Establishment Panel shows that micro and small firms in Saxony have become significantly more innovative than similar firms in other East German regions after the introduction of the novel policy in 2007. Our findings suggest that this new pathway to an SME-focused, close-to-the-market innovation policy may be a promising blueprint for EU innovation policy in structurally weak regions.

Original languageEnglish
JournalReview of Regional Research
Issue number2
Pages (from-to)185-210
Publication statusPublished - Oct 2021

Bibliographical note

Publisher Copyright:
© 2021, Springer-Verlag GmbH Germany, part of Springer Nature.


  • C23
  • De minimis principle
  • Germany
  • Innovation
  • Innovation policy
  • O31
  • O38
  • R58
  • SME
  • Structurally weak regions
  • Valley of death


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