A surreal illustration of an R&D project journey with funding challenges and innovative outcomes.

Funding Innovation: How Public Grants Impact R&D Project Complexity

Rhea Morgan in Business & Economy December 2025 • 4 min read.

"Explore the hidden complexities and surprising impacts of public funding on research and development projects, turning bureaucratic hurdles into opportunities for innovation."

In today's economy, projects are fundamental to innovation, research, and organizational change. While project management has advanced, many projects still struggle to meet strategic objectives, often due to perceived complexity. This is especially true for small and medium-sized enterprises (SMEs) engaging in research and development (R&D) projects.

SMEs are increasingly participating in publicly funded collaborative R&D projects to foster innovation. While such projects are known to generate positive impacts, they also bring complexities that require careful management. Understanding these complexities and developing appropriate managerial responses is crucial for project success.

This article explores how public co-funding of R&D projects affects the perceived complexity among project team members, focusing on an industrial SME in Spain. By examining the subjective experiences of project participants, we aim to provide insights into managing complexity and enhancing project performance.

The Hidden Costs of Public Funding: Unpacking R&D Project Complexity

A surreal illustration of an R&D project journey with funding challenges and innovative outcomes.

Project complexity significantly impacts the success of R&D endeavors. Complexity arises from various factors, including structural elements, socio-political dynamics, and emergent issues. Structural complexity involves the number of project elements, their interdependence, and the pace of work. Socio-political complexity stems from organizational structures, power dynamics, and stakeholder involvement. Emergent complexity arises from uncertainty, changes, and a lack of clear definitions.

When public funding enters the equation, it adds layers of complexity. Publicly funded projects often require adherence to specific bureaucratic tasks, strict control procedures, and regular reporting, impacting project flexibility and agility. Balancing the reduced financial risk from public funds with the increased complexity is a critical challenge for SMEs.

Structural Complexity: Increases with project size, variety of tasks, number of locations, and strict deadlines.
Socio-Political Complexity: Related to organizational politics, power dynamics, and conflicting objectives among stakeholders.
Emergent Complexity: Dependent on uncertainty, new technologies, changes in requirements, and ill-defined objectives.

A case study of an industrial SME, "Pressure," reveals how public funding impacts perceived complexity. The "Smart" project aimed to design and build a prototype test bench. Data was collected through semi-structured interviews with project participants at the beginning and end of the co-funded project phase. The results showed a significant increase in perceived complexity during the co-funded portion, driven by tensions between the co-financing entity's requirements and the SME's standard working procedures.

Turning Complexity into Competitive Advantage

Managing complexity effectively can become a competitive advantage. SMEs should focus on streamlining communication, fostering collaboration, and adapting internal procedures to meet both project goals and public funding requirements. By embracing flexibility and proactively addressing uncertainties, SMEs can navigate the complexities of publicly funded R&D projects and achieve innovation success.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.1016/j.jbusres.2023.113672,

Title: How Public Funding Affects Complexity In R&D Projects. An Analysis Of Team Project Perceptions

Subject: econ.gn q-fin.ec

Authors: Jose M. Gonzalez-Varona, Natalia Martin-Cruz, Fernando Acebes, Javier Pajares

Published: 31-05-2024

Everything You Need To Know

What are the key types of complexity that impact R&D projects, and how do they manifest?

R&D projects are influenced by three main types of complexity: Structural Complexity, Socio-Political Complexity, and Emergent Complexity. Structural Complexity arises from factors like project size, the diversity of tasks, the number of locations involved, and strict deadlines. Socio-Political Complexity stems from organizational politics, power dynamics, and conflicting objectives among stakeholders. Emergent Complexity, on the other hand, is related to uncertainty, the introduction of new technologies, changes in requirements, and ill-defined objectives. Understanding these complexities is crucial for SMEs to effectively manage their R&D projects, especially when public funding is involved.

How does public funding specifically increase the complexity of R&D projects for SMEs?

Public funding introduces additional layers of complexity to R&D projects, mainly due to the requirements imposed by the co-financing entity. These requirements often include adherence to specific bureaucratic tasks, strict control procedures, and regular reporting obligations. While public funds reduce financial risk, the increased complexity can impact project flexibility and agility. SMEs must carefully balance the benefits of reduced financial risk with the added burdens of these bureaucratic processes to ensure project success.

In what ways can SMEs manage the increased complexity arising from public co-funding to ensure project success?

To successfully manage the complexities introduced by public co-funding, SMEs should focus on several key strategies. These include streamlining communication among project team members, fostering strong collaboration, and adapting internal procedures to meet both project goals and the specific requirements of the co-funding entity. Moreover, SMEs can benefit from embracing flexibility and proactively addressing uncertainties that may arise during the project lifecycle. By implementing these strategies, SMEs can navigate the complexities and increase their chances of achieving innovation success.

What was the main observation from the case study of the "Pressure" SME regarding public funding and project complexity?

The case study of the industrial SME "Pressure" revealed a significant increase in perceived complexity during the co-funded portion of their "Smart" project. This increase was primarily driven by tensions between the specific requirements of the co-financing entity and the SME's standard working procedures. The study highlights how the need to comply with the co-financing entity's regulations and reporting processes adds to the overall complexity experienced by the project team.

How can the management of complexity provide a competitive advantage for SMEs involved in R&D projects?

Effective management of project complexity can indeed serve as a competitive advantage for SMEs. By streamlining communication, fostering collaboration, and adapting internal procedures to meet both project goals and public funding requirements, SMEs can improve their project performance. Embracing flexibility and proactively addressing uncertainties allows SMEs to navigate the complexities of publicly funded R&D projects more efficiently. This not only improves project outcomes but also positions the SME favorably for future innovation opportunities and collaborations, potentially leading to a stronger competitive position within their industry.