The Impact of R&D Subsidies on Firm Innovation

49 Pages Posted: 11 Jul 2014

Date Written: April 24, 2014

Abstract

This paper evaluates the impact of an R&D subsidy program implemented in a region of northern Italy on innovation by beneficiary firms. In order to verify whether the subsidies enabled firms to increase patenting activity, we exploit the mechanism used to allot the funds. Since only projects that scored above a certain threshold received the subsidy, we use a sharp regression discontinuity design to compare the number of patent applications, and the probability of submitting one, of subsidized firms with those of unsubsidized firms close to the cut-off. We find that the program had a significant impact on the number of patents, more markedly in the case of smaller firms. Our results show that the program was also successful in increasing the probability of applying for a patent, but only in the case of smaller firms.

Keywords: research and development, investment incentives, regression discontinuity design, patents

JEL Classification: R0, H2, L10

Suggested Citation

Bronzini, Raffaello and Piselli, Paolo, The Impact of R&D Subsidies on Firm Innovation (April 24, 2014). Bank of Italy Temi di Discussione (Working Paper) No. 960, Available at SSRN: https://ssrn.com/abstract=2464525 or http://dx.doi.org/10.2139/ssrn.2464525

Raffaello Bronzini (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Paolo Piselli

Bank of Italy ( email )

Via Milano, 64
00184 Rome
Italy

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