Instrument policy mix and firm size: is there complementarity between R&D subsidies and R&D tax credits?

Abstract

Nowadays, a rising number of evaluations investigates a multifaceted concept of the policy mix. Our study specifically focuses on the mix of two most frequently used supply-side instruments–R&D subsidies and R&D tax credits. Drawing on the longitudinal sample of Spanish manufacturing firms, we investigate whether there is a complementary interaction between these policy instruments with respect to product and process innovations. Moreover, by employing a dynamic random-effects probit estimator, we account for the persistence of innovation and endogeneity of public support. The results, that are separately estimated for SMEs and large firms, uniformly show evidence of no interplay between two policy instruments either in SMEs or large firms. However, among factors that influence the propensity to product and process innovations, by far, the largest effect is generated by true state dependence. These findings provide some policy implications for fostering product and process innovations in the long run.

A lasting crisis affects R&D decisions of smaller firms: the Greek experience

“…Any type of support in collaboration in R&D for smaller firms is beneficiary (Matt et al, 2012) as these firms rely more on external sources of input to the innovation process and as smaller firms tend to receive greater benefit from such exchange. Overall, such a policy mix would support smaller firms (Petrin & Radicic, 2021) to survive such long-lasting crisis and secure growth prospects afterwards. The other option could be to simply let some less efficient small and micro firms exit the market, which could create an opportunity to increase the notoriously underrepresented number of large firms in such moderate innovation economies by removing regulatory obstacles that hinder productivity (Kilinç 2018) and the growth of the remaining smaller firms (Herrmann & Kritikos, 2013), thus increasing labor productivity by supporting transitions from small to large firms.…”

Selected aspects of indirect R&D support in the Czech Republic

“…Market failures are a clear argument for government intervention in the area of R&D (Griliches, 2000). Over the years, the case for public support for R&D has been growing stronger (Lundvall & Borrás, 2009;Smith, 2015), as R&D is not the concern of a particular single firm but is influenced by the maturity of a given economy and the government's priorities in this area (Petrin & Radicic, 2021;Caleb et al, 2021). In addition to that, R&D support positively influences company´s own R&D expenditures (Klímová, Žítek, & Králová, 2020).…”