Estimating the additionality of R&D subsidies using proposal evaluation data to control for research intentions

Abstract

Empirical examination of whether R&D subsidies crowd out private investments has been hampered by selection problems. A particular worry is that project quality and research intentions may be correlated with the likelihood of receiving subsidies. Using proposal evaluation data to control for research intentions, we do not find strong evidence suggesting that this type of selection creates a severe bias. Proposal evaluation grades strongly predict R&D investments and reduce selection bias in cross-sectional regressions, but there is limited variation in grades within firms over time. Hence, in our sample, unobserved project quality is largely absorbed by firm fixed effects. Our best estimate of the short-run additionality of R&D subsidies is 1.15, i.e., a one-unit increase in subsidy increases total R&D expenditure in the recipient firm by somewhat more than a unit. We demonstrate, however, that there is measurement error in the subsidy variable. Additionality is therefore likely to be underestimated. JEL CLASSIFICATION: O38, O32, L53, H25, H32

Financing constraints, R&D investments and innovative performances: new empirical evidence at the firm level for Europe

“…In turn, these European policies have attracted a consistent stream of studies on their additionality (e.g. Busom 2000;Duguet 2004;González and Pazó 2008;Serrano-Velarde 2008;Czarnitzki and Lopes-Bento 2012;Blasio, Fantino, and Pellegrini 2014;Henningsen, Haegeland, and Møen 2015), from which financing constraints have been found to be a serious obstacle to innovation. Direct studies of these barriers are more limited, so that the European focus that characterises this special issue -either on invidual European countries (Bontempi; Coad, Pellegrino and Savona; Czarnitzki, Hall and Hottenrott; Lööf and Nabavi; Teirlinck, Neicu and Kelchtermans) or on groups of them (Altomonte, Mancusi and Vezzulli; Cincera, Ravet, and Veugelers) -appears very timely and desirable, especially in the aftermath of a financial crisis that had a particular impact on Europe and European firms.…”

“…On the other hand, empirical evidence on the viability (or 'additionality') of these policy schemes, and of R&D subsidy programmes in particular, which has increased impressively over time, especially in Europe, has not reached a consensus, and has sometimes found crowdingout effects (e.g. Busom 2000;Duguet 2004;González and Pazó 2008;Serrano-Velarde 2008;Czarnitzki and Lopes-Bento 2012;Blasio, Fantino, and Pellegrini 2014;Henningsen, Haegeland, and Møen 2015). 1 However, the 2008-2009 financial crisis followed by economic recession and the sovereign debt crisis have made the issue at stake relatively more urgent to address than others.…”

La efectividad del Programa de Estímulos a la Innovación (PEI) en Sonora. ¿Qué factores influyen en el impacto del programa sobre la innovación y la competitividad de las empresas?

“…La calidad de las propuestas es un factor que se ha utilizado en la literatura sobre el tema como un predictor relevante del nivel de adicionalidad de los subsidios a la I+D (Henningsen, Haegeland y Møen, 2015;Poti y Cerulli, 2011). Henningsen y colaboradores estiman la adicionalidad de los subsidios a la I+D a partir de los datos arrojados por las evaluaciones de las propuestas, encuentran que datos sobre la calidad general de las propuestas, especialmente los benecios comerciales potenciales y la viabilidad de negocio, pueden predecir el éxito y los resultados de los proyectos nanciados con fondos públicos.…”

Effect of private and public investment in R&D on innovation in Mexico’s biotechnology firms

“…Multiple studies have not found additionality or crowding-out effects, i.e. the more public financing for R&D, the less private financing for R&D (David et al , 2000; Busom, 2000; Wallsten, 2000; Duguet, 2005; González and Pazó, 2008; Serrano-Velarde, 2009; Czarnitzki and Lopes-Bento, 2012; De Blasio et al , 2015; Henningsen et al , 2015; Yu et al , 2016; Wang and Liu, 2009).…”