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Do R&D Subsidies Stimulate or Displace Private R&D? Evidence from Israel

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Lach, Saul

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Abstract

In evaluating the effect of an R&D subsidy we need to know what the subsidized firm would have spent on R&D had it not received the subsidy. Using data on Israeli manufacturing firms in the 1990s we find evidence suggesting that the R&D subsidies granted by the Ministry of Industry and Trade greatly stimulated company financed R&D expenditures for small firms but had a negative effect on the R&D of large firms, although not statistically significant. One subsidized New Israeli Shekel (NIS) induces 11 additional NIS of own R&D for the small firms. However, because most subsidies go to the large firms a subsidy of one NIS generates, on average, a statistically insignificant 0.23 additional NIS of company financed R&D. Copyright 2002 by Blackwell Publishing Ltd

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Article provided by Blackwell Publishing in its journal Journal of Industrial Economics.

Volume (Year): 50 (2002)
Issue (Month): 4 (December)
Pages: 369-90
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Handle: RePEc:bla:jindec:v:50:y:2002:i:4:p:369-90

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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
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  4. Manuel Trajtenberg, 2000. "R&D Policy in Israel: An Overview and Reassessment," NBER Working Papers 7930, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
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  1. Fier, Andreas & Aschhoff, Birgit & Löhlein, Heide, 2006. "Detecting Behavioural Additionality : An Empirical Study on the Impact of Public R&D Funding on Firms? Cooperative Behaviour in Germany," ZEW Discussion Papers 06-37, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
    Other versions:
  2. José Miguel Benavente & Gustavo Crespi & Alessandro Maffioli, 2007. "Public Support to Firm-Level Innovation: An Evaluation of the FONTEC Program," OVE Working Papers 0507, Inter-American Development Bank, Office of Evaluation and Oversight (OVE). [Downloadable!]
  3. Andreja Jaklic & Joze P. Damijan & Matija Rojec, 2008. "Innovation Cooperation and Innovation Activity of Slovenian Enterprises," LICOS Discussion Papers 20108, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  4. Mª Beatriz Corchuelo Martínez-Azúa & Ester Martínez Ros, 2008. "Application of R & D fiscal incentives in Spanish manufacturing firms," Hacienda Pública Española, IEF, vol. 187(4), pages 9-39, December. [Downloadable!]
  5. Ari Hyytinen & Otto Toivanen, 2003. "Do Financial Constraints Hold Back Innovation and Growth? Evidence on the Role of Public Policy," Discussion Papers 820, The Research Institute of the Finnish Economy. [Downloadable!]
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  6. Jyrki Ali-Yrkkö, 2005. "Impact of Public R&D Financing on Employment," Economics Working Papers 039, European Network of Economic Policy Research Institutes. [Downloadable!]
  7. Holger Görg & Eric Strobl, 2005. "Do Government Subsidies Stimulate Training Expenditure? Microeconometric Evidence from Plant Level Data," IZA Discussion Papers 1606, Institute for the Study of Labor (IZA). [Downloadable!]
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  8. Daniel Chudnovsky & Andrés López & Martín Rossi & Diego Ubfal, 2006. "Evaluating A Program of Public Funding of Private Innovation Activities. An Econometric Study of FONTAR in Argentina," OVE Working Papers 1606, Inter-American Development Bank, Office of Evaluation and Oversight (OVE). [Downloadable!]
  9. Aerts, Kris & Schmidt, Tobias, 2006. "Two for the price of one? : On additionality effects of R&D subsidies ; a comparison between Flanders and Germany," ZEW Discussion Papers 06-63, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  10. Czarnitzki, Dirk & Fier, Andreas, 2002. "Do Innovation Subsidies Crowd Out Private Investment? : Evidence from the German Service Sector," ZEW Discussion Papers 02-04, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  11. Hernan Jaramillo Salazar & Carlos Pombo & Juan Miguel Gallego, 2002. "Incentivos fiscales en ciencia, tecnología e innovación: una revisión y análisis de la experiencia internacional," BORRADORES DE INVESTIGACIÓN 002828, UNIVERSIDAD DEL ROSARIO - FACULTAD DE ECONOMÍA. [Downloadable!]
  12. Jyrki Ali-Yrkkö, 2005. "Impact of Public R&D Financing on Private R&D: Does Financial Constraint Matter?," Economics Working Papers 030, European Network of Economic Policy Research Institutes. [Downloadable!]
  13. Fier, Andreas & Heger, Diana & Hussinger, Katrin, 2005. "Die Wirkungsanalyse staatlicher Förderprogramme durch den Einsatz von Matching- und Selektionsmodellen am Beispiel der Fertigungstechnik," ZEW Discussion Papers 05-09, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  14. Manuel Trajtenberg, 2000. "R&D Policy in Israel: An Overview and Reassessment," NBER Working Papers 7930, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Ebersberger, Bernd & Czarnitzki, Dirk & Fier, Andreas, 2004. "The Relationship between R&D Collaboration, Subsidies and Patenting Activity : Empirical Evidence from Finland and Germany," ZEW Discussion Papers 04-37, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  16. Tommy Clausen, 2007. "Access (not) granted: What kinds of firms participate in technology programs?," Working Papers on Innovation Studies 20070612, Centre for Technology, Innovation and Culture, University of Oslo. [Downloadable!]
  17. Jyrki Ali-Yrkkö, 2004. "Impact of Public R&D Financing on Private R&D - Does Financial Constraint Matter?," Discussion Papers 943, The Research Institute of the Finnish Economy. [Downloadable!]
  18. Aerts, Kris & Czarnitzki, Dirk, 2004. "Using Innovation Survey Data to Evaluate R&D Policy : The Case of Belgium," ZEW Discussion Papers 04-55, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  19. Heli Koski, 2008. "Public R&D Funding and Entrepreneurial Innovation," Discussion Papers 1142, The Research Institute of the Finnish Economy. [Downloadable!]
  20. Jyrki Ali-Yrkkö, 2005. "Impact of Public R&D Financing on Employment," Discussion Papers 980, The Research Institute of the Finnish Economy. [Downloadable!]
  21. Kangasharju, Aki & Venetoklis, Takis, 2002. "Effect of business subsidies on labour demand: overall evaluation with regional extensions," ERSA conference papers ersa02p172, European Regional Science Association. [Downloadable!]
  22. Czarnitzki, Dirk & Toole, Andrew A., 2006. "Business R&D and the Interplay of R&D Subsidies and Market Uncertainty," ZEW Discussion Papers 06-55, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  23. Tommy Clausen, 2008. "Do subsidies have positive impacts on R&D and innovation activities at the firm level?," Working Papers on Innovation Studies 20070615, Centre for Technology, Innovation and Culture, University of Oslo. [Downloadable!]
  24. Asher Blass & Oved Yosha, 2003. "Financing R&D in mature companies: an empirical analysis," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 12(5), pages 425-447, October. [Downloadable!] (restricted)
  25. Takalo, Tuomas & Tanayama, Tanja & Toivanen, Otto, 2008. "Evaluating innovation policy: a structural treatment effect model of R&D subsidies," Research Discussion Papers 7/2008, Bank of Finland. [Downloadable!]
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