Sunk Costs, Extensive R&amp;D Subsidies and Permanent Inducement Effects

Arque-Castells, Pere; Mohnen, Pierre

doi:10.2139/ssrn.2062233

Cited by 10 publications

(16 citation statements)

References 32 publications

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“…It has been argued that R&D subsidies can increase aggregate R&D in two (non mutually exclusive) ways: they can increase the number of firms performing R&D (extensive margin) or the R&D investment made by any firm (intensive margin) (Gonzalez et al, 2005;Arqué-Castells and Mohnen, 2015;Garza et al, 2015). Arqué-Castells and Mohnen (2015) suggest that R&D subsidies can stimulate the increase in R&D over one or the other margin depending on their size. Subsidies that are large enough to cover the cost of initiating R&D activities (i.e.…”

Section: Interpretative Framework and Resulting Hypothesesmentioning

confidence: 99%

“…The term 'R&D effects' refers to the increase in R&D investment induced by the receipt of public aid (David and Hall, 2000). From a social viewpoint, this can be achieved both through an increase in R&D investment by all firms, including those that were already R&D performers, and through an increase in the number of R&D performers (Gonzales et al, 2005;Arqué-Castells and Mohnen, 2015;Garza et al, 2015). In what follows we will consider both aspects.…”

Section: Introductionmentioning

confidence: 99%

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A comparative evaluation of regional subsidies for collaborative and individual R&D in small and medium-sized enterprises

2018

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We analyse whether public subsidies supporting collaborative research and development (R&D) projects in small and medium-sized enterprises (SMEs) are able to encourage persistent R&D investment and interorganisational networking more than subsidies supporting individual R&D projects. Adopting a counterfactual approach to policy evaluation, we compare subsidies for collaborative R&D and for individual R&D implemented in the same Italian region in the same period. Our findings suggest that, once public support is no longer available, the two subsidies have different effects on different types of SMEs. If the policymakers' objective is to increase the number of R&D-performing SMEs over time, they should provide subsidies for collaborative R&D to firms with modest R&D experience. If their objective is to increase the amount of spontaneous R&D investment over time, they should target SMEs with some prior R&D experience, using either subsidy. Finally, if their objective is to induce SMEs to network with external organisations, subsidies for collaborative R&D projects should be preferred to subsidies for individual R&D projects.

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Section: Interpretative Framework and Resulting Hypothesesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

A comparative evaluation of regional subsidies for collaborative and individual R&D in small and medium-sized enterprises

2018

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“…the funding for R&D that would have been done anyway, is a typical phenomenon of volume-based schemes. R&D has been shown to be persistent (Peters, 2009, Arqué-Castells & Mohnen, 2015. Hence once in the R&D game, firms tend to remain in the R&D game.…”

Section: Discussion Of the Resultsmentioning

confidence: 99%

Comment: Effectiveness of public support for R&D and entrepreneurship

Mohnen¹

2017

Ecostat

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The papers by Dortet-Bernadet and Sicsic and by Redor in this issue examine respectively the success of R&D financial support programs in stimulating private R&D and the success of subsidized start-ups for the unemployed in creating long-lasting firms. Both papers focus on small French firms. Both programs are found to suffer from a deadweight loss. This comment discusses the results obtained and the policy conclusions that can be drawn from them. It is argued that the deadweight loss is in part unavoidable but that there are ways to limit it, for instance by using a policy mix of R&D tax incentives and subsidies, favoring tax incentives for small firms and subsidies for large firms. It is also recalled that a policy ought to be evaluated from various perspectives. Besides R&D additionality and firm survival a full cost benefit analysis would also consider R&D externalities, firm retention and decrease in unemployment. JEL codes: O31, J68

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“…Several papers have looked at selection of firms into Spanish R&D subsidies (Heijs 2005;Huergo and Trenado 2010;Arqué-Castells and Mohnen 2015). Their main finding has been that there are barriers for firms to start new R&D that in turn prevents them from applying for grants.…”

Section: Firm Subsidies and Strategic Firm Behaviormentioning

confidence: 99%

Subsidy Entrepreneurs: an Inquiry into Firms Seeking Public Grants

2019

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This paper studies the incentives and characteristics of firms that apply for, and eventually receive, one or multiple governmental grants intended to stimulate innovation and growth. The analysis departs from a contest model in which entrepreneurs are free to allocate their effort between production and seeking grants. The results suggest that highly productive entrepreneurs abstain from seeking grants, moderately productive firms allocate a share of their effort to grant seeking, and low-productivity firms allocate most resources to seeking grants. Due to their efforts in seeking grants, these low-productive subsidy entrepreneurs also have a relatively high probability of receiving the grants. Using comprehensive data over grants from the three largest grant-distributing agencies in Sweden, we find concordant evidence of a negative relation between the probability of receiving a grant and firm productivity. As we go from single-to multiple-grant-supported firms, this negative relation becomes more pronounced.

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Sunk Costs, Extensive R&D Subsidies and Permanent Inducement Effects

Cited by 10 publications

References 32 publications

A comparative evaluation of regional subsidies for collaborative and individual R&D in small and medium-sized enterprises

A comparative evaluation of regional subsidies for collaborative and individual R&D in small and medium-sized enterprises

Comment: Effectiveness of public support for R&D and entrepreneurship

Subsidy Entrepreneurs: an Inquiry into Firms Seeking Public Grants

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