Is purchasing a new machine productive innovation? Is implementing a new ERP enough to submit an application? What about increasing a factory's capacity?
These are frequent questions whenever a new call opens under the Business Competitiveness Incentive System, in its Productive Innovation strand.
The answer is that an investment project does not automatically become an innovation project simply because it includes new equipment or technology.
The starting point should be different: understanding what will change structurally within the company after the investment.
What does Productive Innovation seek to support?
The purpose of this instrument is to stimulate innovative business investment and help companies become more competitive.
For example, the MPr-2026-6 call currently in force covers individual operations promoted by SMEs that represent productive investment in innovative activities. The framework also prioritises the production of tradable and internationally marketable goods and services with high added value and significant domestic content.
This means that presenting a list of expenses is not enough.
The company must demonstrate the transformation those expenses will enable.
Creating a new establishment
One possible category is the creation of a new establishment.
This may involve a new industrial unit, a new production facility or another establishment connected with the development of the company's economic activity.
However, a new building or location is not sufficient in itself.
The productive project to be implemented, the activity to be developed, the associated investments and their contribution to the objectives of the incentive scheme must all be assessed.
Under the current Productive Innovation framework, the creation of a new establishment is expressly included among the types of initial investment that may receive support.
Increasing the capacity of an existing establishment
Another common situation involves a company that already has a production unit and wants to increase its capacity significantly.
This may be achieved by acquiring new equipment, introducing automation, reorganising the production process or incorporating new technologies.
The essential point is to demonstrate the effect of the investment through concrete questions:
- What is the current capacity, and what will it be after the project?
- Which production constraints are currently limiting growth?
- Is there sufficient demand to justify the increase?
- What impact is expected on sales, exports, productivity and employment?
The current SICE framework considers an increase in the capacity of an existing establishment to be one of the possible categories of initial investment.
Diversifying production
A company may also wish to use its skills and industrial capacity to begin producing new products or providing new services.
In this case, the project must represent genuine diversification.
It cannot simply introduce minor variations of something already produced.
The degree of novelty, the investments required, the target markets and the transformation introduced at the establishment all need to be assessed.
Depending on the specific features of the operation, diversification into products not previously manufactured or services not previously provided may fall within the scope of Productive Innovation.
A fundamental change to the production process
This is a particularly relevant area in the context of Industry 4.0, automation, artificial intelligence and digitalisation.
A company may continue to produce similar products while fundamentally transforming how it produces them through solutions such as:
- robotics;
- workflow automation;
- integration between equipment;
- smart production systems;
- automated quality control;
- data-supported planning;
- artificial intelligence applied to production;
- digital twins;
- advanced traceability systems.
Individually, each technology may be no more than an expense.
When integrated into a coherent project capable of significantly transforming the overall production process, these technologies can form part of a genuine productive innovation strategy.
The current call expressly includes a fundamental change to the overall production process or provision of services among the categories that may qualify.
Which expenses can be included?
This is usually the next question, because production equipment naturally plays a central role in many projects.
However, an application may include different components required to implement the investment, provided that they comply with the eligibility rules of the specific call.
Digital systems, equipment, technology, industrial property, certain project-related works and other investments may be treated differently depending on the category, region, nature of the company and applicable rules.
This is precisely why the analysis should not begin with the question, "Is this machine eligible?"
It should begin with, "What transformation project do we want to implement?"
Only then should the project be broken down into the required investments and the eligibility of each component assessed individually.
Is an ERP, for example, innovation?
It depends. If a company only wants to replace an old administrative software package with a newer version, it will be difficult to build a genuine productive innovation rationale around that acquisition alone. But consider a different scenario.
The company intends to automate part of its production, integrate equipment, plan manufacturing orders in real time, manage inventory automatically, introduce full traceability, use production data to optimise capacity and connect that entire ecosystem to the ERP.
In this case, the system is no longer assessed in isolation. It becomes part of a broader transformation of the production process, and that coherence must be explained in the application.
Eligibility does not mean approval
There is another important distinction: an expense being eligible does not mean that the project will automatically be competitive, because calls operate within an assessment and selection process.
The application must demonstrate the quality of the project, the company's ability to implement it, financial coherence, a contribution to innovation and competitiveness, and economic impact.
It is therefore possible to build a budget consisting of potentially eligible expenses and still present an unconvincing project.
This is why a well-prepared application must tell an economic story and provide coherent answers to the essential questions:
- Where is the company today, and what constraint does it face?
- What investment will be made?
- What will change, and what impact will it have?
- Why is the company capable of implementing the project?
Location also matters
The framework and support conditions may vary according to the region where the investment is made.
The current MPr-2026-6 call covers mainland Portugal, with different conditions and allocations depending on location, including a distinction between low-density territories and other areas. The maximum support rates also vary by region and remain subject to the applicable State aid limits.
This reinforces the need to assess every project individually.
The same company may find different conditions for two similar investments made at establishments in different regions.
The incentive should form part of the project's financing
A Productive Innovation application should not be prepared separately from the financial analysis of the investment.
The company needs to understand the total investment, the potentially eligible proportion, the expected support, when it may receive that support and how it will finance the remainder.
It may be necessary to combine equity, bank finance and the incentive.
The impact of the investment on working capital, production capacity, sales and future cash flow should also be assessed.
This integration is particularly important for larger projects.
Meaningful support improves the financial return of a project.
It does not remove the need for an appropriate financing structure.
First the project, then the application
Productive Innovation can be a particularly relevant instrument for companies seeking to increase capacity, modernise operations substantially, create new units or launch new products.
But the incentive should finance a business strategy, not replace that strategy.
At Fenix Capital Partners, we approach these projects by combining analysis of the incentive scheme with the economic and financial dimensions of the investment.
First, we understand what the company intends to transform.
Then we structure the project, identify the investments, test its fit with Portugal 2030 and build an application aligned with the business objectives.
A strong application does not begin in the Funds Portal. It begins with the company's strategy.