Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0363.pdf Non-Technical SummaryDo public R&D subsidies stimulate or simply crowd out private investment? The economic literature concerning external effects indicates that innovations suffer from market failure. Innovation projects with high social returns may not be implemented, because the induced private benefits do not exceed the private costs. The rationale of public R&D funding is to reduce private costs and therefore raise the investment in the R&D projects and the number of conducted R&D projects. However there is an incentive for all firms to apply for public funding, even for those who could perform their innovation activities using their own funds. Thus, the impact of the public R&D funding is questionable.The focus of this paper is on the direct funding of R&D projects in the German manufacturing sector granted by the Federal Ministry of Education and Research (BMBF). This study applies parametric and semiparametric two-step selection models. Selection models treat the receipt of public R&D funding as endogeneous and include a selection correction for this non-random selection process, in the structural equation on the firms' R&D expenditure. In a first step, firms' probability of receiving public R&D funding is estimated and in a second step, the effect of the public funds on firms' R&D expenditure is considered. Selection models control for unobservable characteristics entering both the selection and the structural part of the model.The parametric two-step Heckman model serves as a benchmark. Alternatively, a dummy variables estimator (Cosslett, 1991), a series estimator (Newey, 1999) and Robinson's (1988) estimator as a partial linear model are applied. Semiparametric estimators identify only the slope parameters of the structural equation. Hence, an additional estimator for the intercept is needed to identify the treatment effects. This study uses the intercept estimators developed by Heckman (1990) and Andrews and Schafgans (1998).In line with previous studies, the finding is that R&D subsidies have a positive effect on firms' R&D expenditure for all estimated models. However, it also outlines that the level of the "average treatment effect on the treated" varies with the different assumptions of the applied selection model. November 2003Abstract This paper analyzes the effects of public R&D subsidies on R&D expenditure in the German manufacturing sector. The focus is on the question whether public R&D funding stim...

This paper analyses the relationship between firm productivity and export behavior in German manufacturing firms. We examine whether productivity increases the probability of exporting, and assert that there is a causal relationship from high productivity to entering foreign markets, as postulated by the recent literature on international trade with heterogeneous firms. In estimating productivity, we control for a possible simultaneity bias by using semiparametric estimation techniques. Moreover, we apply a matching technique in order to analyze whether the presence in international markets enabled firms to achieve further productivity improvements, without finding significant evidence for this. We conclude that high-productivity firms self-select themselves into export markets, while exporting itself does not play a significant role for productivity improvements.

Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0456.pdf Non-technical summaryThe importance of R&D as a main factor of sustainable growth in highly industrialized economies is undisputable among economists. In recent years a growing gap in the levels of research investment between Europe and the US or Japan has been observed. European governments fear the negative consequences for the long-run technological performance, growth and employment potential. For this reason, the 2002 EU member states agreed on the so-called Barcelona objectives. On this basis, the "Action Plan for Europe" has been proposed: the European R&D expenditure should be increased from currently 1.9% of GDP to 3.0% by 2010, where two thirds should be financed by the business sector, as its R&D spending is currently lagging behind the U.S. and Japan. In order to achieve this goal, national governments are requested to reinforce their national technology programs to support R&D in the business sector.In line with that task, this paper analyzes the effects of public R&D project funding on private R&D expenditure and subsequently the effect of the publicly induced R&D spending on the patenting behavior of firms empirically. The presumed mechanism behind the European Action Plan is that public incentives are expected to stimulate the private R&D engagement and that such additionally induced R&D activities lead to new products and processes improving the European technological performance. This is by no means clear: every firm has an incentive to apply for subsidies and to substitute public funding for private research investment. If full crowdingout effects occur, public incentives would not lead to any improvement of technological performance. Furthermore, it is not clear whether additional R&D projects that have been conducted due to the receipt of subsidies lead to successful results. Assuming that firms have some R&D project portfolio to choose from, they will obviously start with those projects promising the highest expected returns. Hence, publicly funded R&D projects will show lower expected returns than purely privately financed ones; possibly due to a higher outcome uncertainty. Thus, even if no crowding-out effects take place, the technological and economic benefits of public funding are questionable. The central contribution of this paper is the empirical investigation of the link between subsidies, the input side of the innovation process and the impact on technological performance in a system of equat...