Direct and Cross-Scheme Effects in a Research and Development Subsidy Program

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Direct and Cross-Scheme Effects in a Research and Development July 2014Abstract This study investigates the effects of an R&D subsidy scheme on participating firms' net R&D investment. Making use of a specific policy design in Belgium that explicitly distinguishes between research and development grants, we estimate direct and cross-scheme effects on research versus development intensities in recipients firms. We find positive direct effects from research (development) subsidies on net research (development) spending. This direct effect is larger for research grants than for development grants. We also find cross-scheme effects that may arise due to complementarity between research and development activities. Finally, we find that the magnitude of the treatment effects depends on firm size and age and that there is a minimum effective grant size, especially for research projects. The results support the view that public subsidies induce higher additional investment particularly in research where market failures are larger, even when the subsidies are targeting development.

Evaluating the effects of an R&D policy mix of subsidies and tax credits

“…Even though I try to solve this issue by matching on different categories of treatment, this solves the issue only partially. Dose-response methods based on a generalised propensity score have been employed to some effect in literature in order to assess whether treatment effects vary with treatment level (Hottenrott et al, 2014;Marino et al, 2016). Nevertheless, such models only allow comparisons between different levels of the same treatment, rather than between different treatments.…”

“…On the one hand, some studies compare the effects of tax credits with those of subsidies on firms' R&D expenditure (Haegeland & Møen, 2007b;Dumont, 2017;Guerzoni & Raiteri, 2015;Marino et al, 2016). On the other hand, there are studies that distinguish the impact of subsidies on either research or development spending (Czarnitzki, Hottenrott, & Thorwarth, 2011;Hottenrott, Lopes Bento & Veugelers, 2014).…”

Innovation in newly public firms: The influence of government grants, venture capital, and private equity

“…More recent evidence suggests that public research subsidies stimulate private R&D investments (e.g. Becker, 2015;Clausen, 2009;Görg and Strobl, 2007;Hottenrott et al, 2015). The empirical evidence shows that direct subsidies are especially effective to stimulate innovation in areas with higher degrees of innovation novelty (Beck et al, 2017).…”

Start-Up Subsidies: Does the Policy Instrument Matter?

“…Whereas the literature that evaluates innovation-support policies for established companies concludes that treatment effects are highly heterogeneous with regard to the size of the recipient firms and that the effects depend on the nature of the sponsored project (e.g., Hottenrott and Lopes-Bento, 2014;Hottenrott et al, 2017;Nilsen et al, 2018), few studies investigate support specifically targeted towards new firms. The few studies that do look at the role played by public non-venture-capital types of support generally conclude that these programs foster performance.…”