An Empirical Evaluation of the Effects of R&D Subsidies

Abstract

Technology policy is becoming increasingly important in many countries, but there are few studies providing an evaluation based on microeconometric analysis of one common tool, R&D subsidies to private firms. Ex-post policy evaluation, is, however, a necessary step for checking its effectiveness and detecting unanticipated effects. Using a sample of Spanish firms, where half of them received public subsidies for R&D projects, this paper provides evidence on the determinants of firm participation in R&D programs and on the effects that participation has on R&D effort. Results show that firm age and number of patents obtained in the past affect positively the probability to participate, while firm size has a negative effect, probably reflecting the public agency selection rule. Results also show that firm size is negatively related to R&D intensity whether firms are participants or not, and suggest that although in the aggregate complete crowding out effects of public funding can be ruled out, this may not be so for more than a fourth of participants.

JEL Classification: O31, H32, L52