Value for Money? New Microeconometric Evidence on Public R&D Grants in Flanders

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. Non-technical summaryIn this paper, we estimate the effect of subsidies granted by the Flemish government (northern region of Belgium) on R&D spending and R&D employment in recipient firms. As econometric treatment effects studies are nowadays standard in the scholarly literature and even in policy practice, we go beyond the typical applications. Usually scholars estimate a treatment effect on the treated, and then conclude whether a subsidy program is subject to full or partial crowding out effects. In this present study, we add a number of further tests that are of interest for policy makers in their daily decision making. The analyses are based on detailed discussions with the representatives of the public agency administering the innovation policy instruments in Flanders, the "IWT Vlaanderen". In particular, the policy makers were interested in the following questions: (i) Does the receipt of subsidies from other sources on top of IWT grants reduce the effect of the local policy program? (ii) Does the treatment effect decline if the same firm is funded repeatedly over time? (iii) Does granting multiple projects to the same recipient firm in the same time period decrease the treatment effect?The paper discusses a number of further robustness tests and also includes a back of the envelope calculation where we extrapolate the sample results to the population of firms. We conclude that neither subsidies from other sources, nor funding the same firm repeatedly over time, nor granting multiple projects in the same time period reduce the treatment effect of an average, subsidized project in terms of additional R&D expenditure and R&D employment.With respect to the macroeconomic effect, we conclude that a total of 3,019 projects (total value € 628 million) granted between 2004 and 2010 has created (or maintained) about 16,800 person-years of R&D employment in the Flemish economy. Das Wichtigste in Kürze (Summary in German)In IntroductionThe impact of subsidies on firms' innovative behaviour has been of interest in economic literature for many years now. In line with this literature, we are interested in knowing what the effect of one specific instrument is on firms' R&D intensity and R&D employment, namely the effect of subsidies for R&D from the Flemish government (northern part of Belgium). We employ econometric treatment effects models for estimating the treatment effect on the treated. As studies like this are nowadays more or less standard in the scholarly lit...

The impact of Triple Helix agents on entrepreneurial innovations' performance: An inside look at enterprises located in an emerging economy

“…It is a common practice implemented by the majority of governments that have encouraged universities to make their science and engineering more relevant to industry's needs (Cohen et al, 2002). Additionally, these results are also aligned to extant empirical studies that found a productive impact on firm performance (Aerts and Czarnitzki, 2004;Aerts and Schmidt, 2008;Czarnitzki and Lopes-Bento, 2013;Hall and Maffioli, 2008) as well as other studies that recognize that the measures of performance used do not necessarily reflect those benefits (Perkmann and Walsh, 2007). In this sense, even than Autio et al (2014) argue that innovation entrepreneurship used multiple and combined sources of funding (public/private), enterprises with a high-growth orientation located in emerging economies are more likely to use their own financial resources than government subsidies.…”

“…Third, the positive effect of government subsidies on innovation performance is only evidenced when enterprises collaborate with universities (Czarnitzki et al, 2007). However, this positive effect is only observed in enterprises without a high-growth profile (Czarnitzki and Lopes-Bento, 2013). Four, the socio-economic context of the period analyzed has a negative impact on innovation performance of enterprises interviewed.…”

“…These practices have a certain degree of opportunistic even than evidence suggests that these collaborations evolve over time (van de Vrande et al, 2009). Empirical studies in European countries (Belgium and Germany) found that innovation subsidies do not completely displace private expenditure on R&D (that is, they are additional) but have a productive impact on enterprise performance (Aerts and Czarnitzki, 2004;Aerts and Schmidt, 2008;Czarnitzki and Lopes-Bento, 2013). In large Latin American economies, Hall and Maffioli (2008) found similar set of results and reach a more nuanced conclusion.…”

“…5;Leydesdorff and Ivanova, in press), as well as, to the debate of open innovation models to capture the benefits of collaborations among Triple Helix agents (Chesbrough, 2012); (ii) contribute to the financial literature debate about the gap in the analysis and in the use of internal/external funds for financing innovation (Hall and Lerner, 2010;p. 40), as well as, the impact of subsidies on enterprises with an innovative behavior and that supported their innovations by other sources (Czarnitzki and Lopes-Bento, 2013;p.31); (iii) contribute to knowledge transfer and academic entrepreneurship literature debate about a view or performance indicators of the impact of universityenterprises collaboration on entrepreneurial innovations (Grimaldi et al, 2011;p.1053), as well as, the entrepreneurial role of public sector in the creation of a sustainable innovative and entrepreneurial economy (Audretsch and Link, 2016;Leyden, 2016;Leyden and Link, 2015); and (iv) contribute to the entrepreneurship literature debate about a comparison of national systems of innovation, entrepreneurship, and entrepreneurial innovation; more concretely, about the impact of context for entrepreneurial innovation and enterprise growth (Autio et al, 2014;p. 1089 andp.1104).…”

“…In this sense, this paper expects try to contribute to the financial literature debate about the gap in the analysis and in the use of internal/external source of funds for financing entrepreneurial innovations in emerging economies (Hall and Lerner, 2010;p. 40), as well as, the impact of subsidies on enterprises with an entrepreneurial and innovative behavior and that supported their innovations by other sources (Czarnitzki and Lopes-Bento, 2013;p.31). In this scenario, universities play a relevant role such as partner that provides new technology/knowledge as well as the access to government subsidies (Audretsch, 2014).…”