Demand-Side vs. Supply-Side Technology Policies: Hidden Treatment and New Empirical Evidence on the Policy Mix

Abstract

This paper provides new empirical evidence about the impact of various technological policies upon firms’ innovative behaviour. We take into consideration the role of policies for innovative activities and we focus on their interaction. While supply-side policies such as R&D subsidies and tax credits have been both extensively discussed in the literature and empirically investigated, the analysis of innovative public procurement is a growing trend in the literature, which still lacks robust empirical evidence. In this paper, we replicate the existing results on supply-side policies, surmise fresh empirical evidence on the outcome of innovative public procurement, and address the issue of possible interaction among the various tools. When controlling for the interaction with other policies, supply-side subsidies cease to be as effective as reported in previous studies and innovative public procurement seems to be more effective than other tools. The preliminary evidence suggests that technology policies exert the highest impact when different policies interact.

Keywords: R&D subsidies, Public procurement, Crowding-out, Confounding effect, Hidden treatment, Propensity score matching