Innovation Funding Incentives: Norway

Norway boasts a robust and dynamic ecosystem for innovation, driven by a strong commitment from its government to foster research, development, and entrepreneurship. The nation’s funding incentives are strategically designed to support businesses at various stages, from early-stage startups to established companies undertaking ambitious R&D projects. This report will outline the primary innovation funding mechanisms available in Norway and their collective impact on the country’s drive for technological advancement and sustainable economic growth.

Key Funding Incentives

1 | SkatteFUNN (R&D Tax Deduction Scheme)

SkatteFUNN is Norway’s rights-based R&D tax incentive, offering significant financial relief for companies investing in research and development.

Mechanism: Companies can apply for a tax deduction of 19% of their eligible R&D project costs. This deduction is in addition to the regular income deduction for R&D expenses. If the deduction exceeds the assessed tax, the surplus amount is paid out as a tax refund. The maximum deductible expenses are limited to NOK 25 million per year per project.

Eligibility: Companies of all sizes, industries, and types registered in Norway and liable for Norwegian tax can apply. Projects must be approved by the Research Council of Norway, ensuring they align with the tax act’s definition of R&D (developing new or improved products, services, or production methods that generate new knowledge).

Impact: SkatteFUNN significantly reduces the financial risk associated with R&D, encouraging a wide range of companies, particularly small and medium-sized enterprises (SMEs), to undertake innovative projects. It serves as a crucial direct financial boost for innovation.

2 | Innovation Norway

Innovation Norway is the Norwegian Government’s primary instrument for innovation and development of Norwegian enterprises and industry. It provides a wide range of services, including grants, loans, guarantees, and advisory support.

Grants for Startups and Innovation: Innovation Norway offers grants for the development of innovative, market-oriented business ideas. In the initial startup phase, grants typically range from NOK 50,000 to NOK 100,000 for market clarification and testing. For businesses with further growth potential, grants can increase up to NOK 500,000 in subsequent phases for commercialisation projects.

Innovation Loans and Start-up Loans: Beyond grants, Innovation Norway provides various loan schemes to support business development, including innovation loans for projects with high technical risks and start-up loans for new businesses.

Cluster Programs and Networks: Innovation Norway actively supports collaborative projects and helps build networks between companies, customers, suppliers, and knowledge environments, fostering innovation through cooperation.

Humanitarian Innovation Programme: This specific program, managed by Innovation Norway, funds bold innovation projects that aim to improve humanitarian action globally, often in partnership with humanitarian organisations and the private sector.

Impact: Innovation Norway plays a vital role in nurturing innovative business concepts, providing essential capital and expertise, and promoting sustainable growth and internationalisation for Norwegian companies.

3 | The Research Council of Norway (RCN)

The Research Council of Norway is the primary body for distributing public funds to Norwegian research and innovation projects, allocating over NOK 11 billion annually.

• Funding Instruments: RCN offers various funding instruments for SMEs, large companies, research organisations, and public sector entities. These instruments support R&D projects that develop new knowledge and build research expertise to address significant societal challenges.

• Innovation Projects in Business: A key program for companies, “Innovation Project for the Industrial Sector,” encourages businesses to invest in R&D activities that promote innovation and sustainable economic growth. Companies can seek funding to cover up to 50% of their budgeted project costs.

• Doctoral and Postdoctoral Projects: RCN supports Industrial PhD and Public Sector PhD schemes, enabling employees to undertake doctoral research projects in collaboration with universities, fostering knowledge transfer between academia and industry.

• International Cooperation: RCN encourages internationalisation of Norwegian research, offering funding for international R&D collaborations and supporting Norwegian participation in European programmes like Horizon Europe and Eurostars.

• Impact: RCN is crucial for promoting research-based innovation, building national research expertise, and ensuring that R&D contributes directly to societal and industrial needs.

4 | Other Key Initiatives

Enova: This state enterprise allocates funding to Norwegian companies for late-phase technology development and early market introduction of climate and energy solutions, aligning with Norway’s green transition goals.

Gassnova: Provides funding for projects focused on the development and demonstration of cost-effective solutions for Carbon Capture, Transport, and Storage (CCS).

Export Finance Norway (Eksfin): Offers state-backed loans and guarantees to Norwegian export companies and international buyers, facilitating international trade and investments that generate value within Norway.

5 | Venture Capital Landscape

Norway has a robust and growing venture capital (VC) market, demonstrating increasing activity and interest in innovative startups.

Growth and Focus: The Norwegian VC scene has seen rapid growth, particularly in technology, renewable energy, sustainability, and increasingly, the AI space. Oslo serves as a major hub for startup activities and investors.

Key Players: Government-backed investors like Investinor (a state-funded investment company managing significant assets) play a crucial role by making direct and indirect investments in promising non-listed companies. Private VC firms also actively invest in early-stage and growth companies across various industries.

Impact: A collaborative ecosystem, combining government initiatives with private capital, is essential for providing crucial early-stage and growth funding, enabling Norwegian startups to scale and compete globally.

Conclusion

Norway’s comprehensive approach to innovation funding is characterised by strong government backing through tax incentives, diverse grants, and direct funding from key agencies like Innovation Norway and the Research Council of Norway. This multi-faceted public support, coupled with a dynamic and growing venture capital landscape, effectively de-risks innovative projects and provides essential capital for businesses to develop cutting-edge technologies. This integrated strategy is fundamental to Norway’s continued success in fostering technological advancement and maintaining its competitive edge in the global economy, particularly in green and sustainable industries.