In their review of policy evaluation in innovation and technology, Papaconstantinou
and Polt (1997) provide a very helpful definition of evaluation. They say:
“Evaluation refers to a process that seeks to determine as systematically and objectively as
possible the relevance, efficiency and effect of an activity in terms of its objectives, including the
analysis of the implementation and administrative management of such activities.”
Economic evaluations allow policy makers to examine the justification of policies and
programmes, and to analyse their impacts in order to provide information to guide
resource allocation and to allow for the identification of international “best practice” in
policy. Evaluations can be undertaken on various levels. Policy makers may use evaluations
at a broad policy level, examining the justification of policies and programmes, etc. At
another level, evaluations are applied at the programme-specific level and can be used to
improve the conduct, quality, and effectiveness of programmes. It is important in all cases
of economic evaluation of SME and entrepreneurship policies and programmes that some
form of cost-benefit appraisal be undertaken. This is because there is always a risk that
policy objectives are achieved without regard to the real cost of achieving them. If the
project, programme, or policy cannot deliver a net social benefit at least equal to the long
term bond rate, then public resources are almost certainly being wasted. A “best practice”
initiative should be able to demonstrate a higher net social benefit (i.e. a higher rate of
return on funds expended relative to the bond rate) than any other alternative.