Research & Development in Portugal
The 2022 National Scientific and Technological Potential Survey (IPCTN), the annual census in the world of Research & Development (R&D), reveals that Portugal reached €4,124 million in total expenditure on R&D activities, equivalent to 1.7% of the national GDP. R&D expenditure increased across all sectors, with the business sector showing the most significant growth, representing 62% of the total national R&D expenditure and 1.02% of the GDP. These results highlight the seventh consecutive year of increased R&D expenditure.
It is important to note that this growth in R&D investment, which in turn enhances the innovative capacity of the Portuguese business landscape, has been driven by various factors such as competitiveness and competition in national and international markets, social and environmental awareness, the 2008 financial crisis, and the 2020 epidemic crisis. Considering this, innovation should be driven not by difficulties or crises, but by the need to instill a collective mindset focused on innovation and measuring its impact on the Portuguese economy.
Indeed, a study by COTEC Portugal – Business Association for Innovation estimates that R&D projects carried out in Portugal in 2023 contributed 1.5% of the national GDP and created 100,000 qualified jobs in Portugal.
Therefore, the existence of public and private incentives, both financial and fiscal, that foster the innovation ecosystem in Portugal is crucial. These incentives aim to:
- Increase the intensity of R&D and innovation in companies and their economic valuation;
- Stimulate the development of new products, processes, or services, or improve existing ones, with emphasis on increasing technological and knowledge complexity (greater specialization of the Portuguese economy);
- Increase highly qualified human resources within companies, especially those dedicated to R&D activities;
- Enhance synergies between the business sector and Non-Business Entities of the Research & Innovation System (ENESII), actively promoting knowledge transfer and advancing the scientific and technological maturity of knowledge acquired in Portugal.
Public Systems for Innovation and R&D Incentives
On the public and national front, companies can find several support mechanisms within Portugal 2030 for Research & Development, including:
- Individual or co-promoted business R&D projects with other companies or ENESII (Universities, Technological Centers, Collaborative Laboratories, among others);
- Demonstration projects of advanced technologies and pilot lines, with higher levels of technological maturity;
- Mobilizing programs, which include projects with high technological and knowledge content, formed by consortia of various entities (companies and ENESII) with sectoral and regional impact;
- R&D hubs, aimed at creating or strengthening internal R&D competencies and capacities within companies; and
- Aspects of intellectual and industrial property, as well as the internationalization of solutions derived from R&D.
Financial support is also available through the current Recovery and Resilience Plan (PRR) and, at the European level, Horizon Europe, which provide incentives for expenses such as human resources, raw materials and consumables, instruments and equipment, software and licenses, third-party services, attendance at fairs and exhibitions, acquisition of patents, among others.
It is important to note that financial support for R&D generally features higher non-repayable incentive rates, precisely to encourage investment in innovative solutions with scientific and technological uncertainties that naturally present the risk of not yielding economic benefits (at least directly).
Interestingly, in 2022, over 87% of the R&D investment made by companies was financed using their own funds, indicating a significant gap between the business sector and the R&D and Innovation incentives ecosystem.
Additionally, companies can benefit from tax advantages for funded projects or internal projects without public funding, such as SIFIDE or the Patent Box. Financial and fiscal incentive systems can and should be used synergistically in any company’s activities.
Thus, with a well-defined medium to long-term strategy and leveraging public incentives, companies can foster the development of innovative solutions internally, thereby increasing their technological specialization, competitiveness, and export capacity, contributing to the positioning of the Portuguese economy in the European and international community.
Innovation: Alternative Sources of Financing
Naturally, there are ways for a company to obtain financing for certain investment projects. Besides public incentives, companies can also seek complementary or alternative sources, such as banks, venture capital firms, or other private investors.
Focusing on capital acquisition through investment funds managed by venture capital firms, we encounter two main types of fund intervention: equity investment with an exit perspective of 5-10 years or debt-type capital instruments, which are essentially attractive financing options in the market.
These debt-type capital instruments available to companies, characterized by investment ticket issuance, have been leveraged with SIFIDE Funds, specific capital funds for R&D and Innovation investment, where companies certified by the National Innovation Agency (ANI) with the ID Seal can benefit from this financing.
Flexibly, considering factors such as the company’s maturity, sector, and management team, a company can seek capital to enhance its innovation investments and even complement the non-financed component of funded projects.
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