Evaluation and Monitoring of Business Aid in Finland. Applicant Enterprises Projects and Distributors of Aid in Industrially Declining Regions. A Quantitative Approach

The study examines comprehensively the three entities involved when state aid is distributed to enterprises in Finland, namely the applicant enterprises, the projects financed and the distributors of funds. It demonstrates how quantitative methods can be used to monitor and evaluate state aid to enterprises. In the study the distributor is the Ministry of Trade and Industry (KTM). The material is gathered from data found in state aid applications from enterprises located in industrially declining (Objective 2) areas in the prefectures of Varsinais-Suomi and Päijät-Häme during 1995-96. The study lists certain characteristics of the applicant enterprises, the projects financed and it measures the performance of different financing operations by KTM. Furthermore, it examines the factors which influence KTM in deciding whether to finance or not a state aid application by building logistic regression models. Results indicate that (a) there are no clear differences between enterprises which receive aid and those that do not and (b) each KTM office applies to some extent its own financing procedures. Recommendations include (1) standardization of selection methods, (2) on-going utilization of the databases, (3) creation of a flexible and targeted system of state aid where final beneficiaries are clearly defined, (4) creation a follow-up system to measure and evaluate the impact of the state aid, (5) imposing restrictions as to how often the same enterprises are to be granted aid, (6) an introduction of an alternative type of aid in the form of forgivable loans.