The Causal Effects of R&D Grants: Evidence from a Regression Discontinuity

76 Pages Posted: 22 Jul 2020 Last revised: 24 Jul 2020

See all articles by Pietro Santoleri

Pietro Santoleri

Scuola Superiore Sant'Anna di Pisa

Andrea Mina

Scuola Superiore Sant'Anna; Scuola Superiore Sant'Anna

Alberto Di Minin

Scuola Superiore Sant'Anna di Pisa

Irene Martelli

Scuola Superiore Sant'Anna di Pisa

Date Written: June 24, 2020

Abstract

Direct public support for business R&D is a well-established remedy to market failures, yet empirical evidence on its effectiveness yields conflicting results. The paper investigates the impact of the first European public R&D grant program targeting small and medium enterprises (i.e. the SME Instrument) on a wide range of firm outcomes. We leverage the assignment mechanisms of the policy and employ a sharp regression discontinuity design to provide the broadest quasi- experimental evidence on R&D grants over both geographical and sectoral scopes. Results show that grants trigger sizable impacts. They increase investment, notably in intangibles, and innovation outcomes as measured by cite-weighted patents; they trigger faster growth in assets, employment and revenues; they lead to higher likelihood of receiving follow-on equity financing and lower failure chances. These effects tend to be larger for firms that are smaller and younger, or operating in sectors characterized by higher financial frictions. Furthermore, responses are stronger in countries and regions with lower economic development. The paper provides extensive evidence that the beneficial effects of R&D grants materialize through funding rather than certification effects.

Keywords: Regression Discontinuity Design, Research and Development, Innovation Policy, SMEs

JEL Classification: D22, G24, G32, L53, O31

Suggested Citation

Santoleri, Pietro and Mina, Andrea and Di Minin, Alberto and Martelli, Irene, The Causal Effects of R&D Grants: Evidence from a Regression Discontinuity (June 24, 2020). Available at SSRN: https://ssrn.com/abstract=3637867 or http://dx.doi.org/10.2139/ssrn.3637867

Pietro Santoleri (Contact Author)

Scuola Superiore Sant'Anna di Pisa ( email )

Piazza Martiri della Liberta, n. 33
Pisa, 56127
Italy

Andrea Mina

Scuola Superiore Sant'Anna ( email )

Pisa
Italy

HOME PAGE: http://https://www.santannapisa.it/it/andrea-mina

Scuola Superiore Sant'Anna ( email )

Institute of Economics
Piazza Martiri della Liberta n. 33
Pisa, 56127
Italy

Alberto Di Minin

Scuola Superiore Sant'Anna di Pisa ( email )

Biblioteca Scuola Superiore Sant'Anna
Piazza Martiri della Liberta, n. 33
Pisa, 56127
Italy

Irene Martelli

Scuola Superiore Sant'Anna di Pisa ( email )

Biblioteca Scuola Superiore Sant'Anna
Piazza Martiri della Liberta, n. 33
Pisa, 56127
Italy

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