Entrepreneurial Finance and the Effects of Restrictions on Government R&D Subsidies

Organization Science, Articles in Advance, pp. primary_article, Forthcoming

40 Pages Posted: 30 Mar 2016 Last revised: 4 Mar 2018

Date Written: March 29, 2016

Abstract

Entrepreneurial ventures often face liquidity constraints. While governments have intervened with programs subsidizing R&D projects, these programs may have their effectiveness undermined by the restrictions they impose on subsidy recipients. We study the impact on venture outcomes of one important restriction, namely, the prohibition on transferring know-how away from a given geographic area. Using novel data on Israeli startups and evaluating a policy change that relaxed this restriction, we find that the policy change increased the likelihood of applying for a subsidy for startups most likely to have been affected by the restriction. We also show that R&D subsidies had a significant positive effect on startup survival, the ability to attract external investment, and innovation, but only for recipients applying for subsidies after the restriction was relaxed.

Keywords: Entrepreneurial Finance, Government R&D Grants, Grant Restrictions

JEL Classification: O32, D82, G28, G24, M13

Suggested Citation

Conti, Annamaria, Entrepreneurial Finance and the Effects of Restrictions on Government R&D Subsidies (March 29, 2016). Organization Science, Articles in Advance, pp. primary_article, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2755769 or http://dx.doi.org/10.2139/ssrn.2755769

Annamaria Conti (Contact Author)

University of Lausanne ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland

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