The Effect of Subsidies on R&D Investment and Success – Do Subsidy History and Size Matter?

39 Pages Posted: 15 Jul 2009

See all articles by Birgit Aschhoff

Birgit Aschhoff

ZEW – Leibniz Centre for European Economic Research

Date Written: 2009

Abstract

This study provides insights into the effects of public R&D grants on R&D input and output of firms from Germany. Previous research has shown that the allocation of R&D project grants is rather stable regarding the pool of beneficiaries. The question is whether this participation pattern can be justified by its realized effects. In addition, the impact of the grant size on the effects is investigated. Therefore, I allow to a certain extent for heterogeneous treatment effects in these two dimensions. Using a sample of about 8,500 observations, a non-parametric matching approach with multiple treatments is applied to estimate the effects of public R&D grants on firm's R&D input. The results show that particularly frequently given grants as well as medium and large grants are suitable to increase the scope of firm-financed R&D plans. For the analysis of the effects on firm's R&D output the R&D expenditures are disentangled in R&D which would have been spent in the absence of the grant and publicly induced R&D, including the grant and the effect on private R&D expenditures. Basically both types of R&D are equally productive in terms of innovative output. For the statement that a rather stable pattern of program participation leads to a lower effectiveness of the instrument no evidence has been found.

Keywords: R&D, public subsidies, innovative performance, Germany

JEL Classification: C2, H32, O38

Suggested Citation

Aschhoff, Birgit, The Effect of Subsidies on R&D Investment and Success – Do Subsidy History and Size Matter? (2009). ZEW - Centre for European Economic Research Discussion Paper No. 09-032, Available at SSRN: https://ssrn.com/abstract=1433275 or http://dx.doi.org/10.2139/ssrn.1433275

Birgit Aschhoff (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany
+49 621 1235 182 (Phone)
+49 621 1235 170 (Fax)

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