Effectiveness of Public R&D Subsidies in East Germany – Is it a Matter of Firm Size?

Abstract

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The effects of public support schemes on small and medium enterprises

“…Our data shows that SMEs which received direct grants have a significantly higher R&D intensity, which confirms findings from Herrera and Sánchez-González (2013) for Spain, and Reinkowski et al (2010) for East Germany. Direct grants increase R&D employment in SMEs, thus supporting findings from Czarnitzki and Lopes-Bento (2013) for Flanders.…”

“…We also consider the effects of subsidies (alone or used jointly in combination with tax incentives) on a number of R&D and innovation variables compared to firms which underwent no treatment. Thus far not much empirical evidence has been provided with respect to the effectiveness of R&D instruments on small and medium-sized firms (Romero-Jordán et al, 2014;Czarnitzki and Lopes-Bento, 2013;Reinkowski et al, 2010;Herrera et al, 2010). The closest to our paper is the study by Hottenrott and Lopes-Bento (2014), which demonstrates that R&D subsidies aimed at incentivizing collaboration in SMEs improve innovation performance.…”

“…Regarding the effect of subsidies, one of the longstanding questions is whether firms substitute subsidy for their own R&D investment (this is usually referred to as crowding out). Although recent studies tend to reject full crowding-out effects, the results are ambiguous: Aerts and Czarnitzki (2006;, Almus and Czarnitzki (2003), Czarnitzki (2001), Czarnitzki and Fier (2002), Duguet (2004), Fier (2002, Gonzalez and Pazo (2006), Gonzalez et al (2005), Gorg andStrobl (2007), Hussinger (2008), Loof and Heshmati (2005), Reinkowski et al (2010), and Herrera and Sánchez-González (2013) reject full crowding-out effects, while Busom (2000), Heijs and Herrera (2004), Kaiser (2004), Lach (2002, Suetens (2002), and Wallsten (2000) find indications that public R&D funding replaces private R&D investments to some extent.…”

“…In this paper we focus on R&D intensity (measured as the share of R&D expenditures in turnover) because it is a better indicator of the extent of the importance of R&D for a firm and the extent of its orientation toward R&D. Most studies which find positive effects on R&D intensity are performed on a sample of firms of all sizes, but some studies confirm positive effects for SMEs as well (Hottenrott and Lopes-Bento, 2014;Reinkowski et al, 2010;Herrera et al, 2010). A related aspect that we investigate is the capacity of a firm to conduct R&D as measured by R&D employment.…”

The Implementation of Research and Development Policy in European and Asian Countries

“…In the case of the dominance of small firms, an innovation system and R&D policy, which takes into account their specifics, must be developed (Reinkowski et al 2010). …”