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Financing Innovation: Evidence from R&D Grants

44 Pages Posted: 7 Nov 2015 Last revised: 2 Oct 2016

Sabrina T. Howell

New York University (NYU) - Leonard N. Stern School of Business

Date Written: July 23, 2016

Abstract

Governments regularly subsidize new ventures to spur innovation. This paper conducts the first large-sample, quasi-experimental evaluation of R&D subsidies. I use data on ranked applicants to the U.S. Department of Energy’s SBIR grant program. An award approximately doubles the probability that a firm receives subsequent venture capital and has large, positive impacts on patenting and commercialization. These effects are stronger for more financially constrained firms. Certification, where the award contains information about firm quality, likely does not explain the grant effect on funding. Instead, the grants seem to reduce investor uncertainty by funding technology prototyping.

JEL Classification: G18, G28, G24, H50, O32, O38, Q48

Suggested Citation

Howell, Sabrina T., Financing Innovation: Evidence from R&D Grants (July 23, 2016). Available at SSRN: https://ssrn.com/abstract=2687457 or http://dx.doi.org/10.2139/ssrn.2687457

Sabrina Howell (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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