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

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  • Annamaria Conti

    (Scheller College of Business, Georgia Institute of Technology, Atlanta, Georgia 30308)

Abstract

Entrepreneurial ventures often face liquidity constraints. While governments have intervened with programs subsidizing research and development (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 start-ups and evaluating a policy change that relaxed this restriction, we find that the policy change increased the likelihood of applying for a subsidy for start-ups most likely to have been affected by the restriction. We also show that R&D subsidies had a significant positive effect on start-up survival, the ability to attract external investment, and innovation, but only for recipients applying for subsidies after the restriction was relaxed.

Suggested Citation

  • Annamaria Conti, 2018. "Entrepreneurial Finance and the Effects of Restrictions on Government R&D Subsidies," Organization Science, INFORMS, vol. 29(1), pages 134-153, February.
    • Handle: RePEc:inm:ororsc:v:29:y:2018:i:1:p:134-153
    DOI: 10.1287/orsc.2017.1168
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    Cited by:

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    2. Jiyoung Kimjeon & Per Davidsson, 2022. "External Enablers of Entrepreneurship: A Review and Agenda for Accumulation of Strategically Actionable Knowledge," Entrepreneurship Theory and Practice, , vol. 46(3), pages 643-687, May.
    3. Zofia Gródek-Szostak & Marcin Suder & Anna Szeląg-Sikora & Luis Ochoa Siguencia, 2020. "The “Dobry Czas Na Biznes” (“Good Time for Business”) Program as a Form of Support for Self-Employment in Poland. A Case Study of the Sub-Regions of the Małopolskie Province," Sustainability, MDPI, vol. 12(22), pages 1-17, November.
    4. Hashai, Niron & Zahra, Shaker A., 2022. "A double-edged sword? Founder Teams' Prior International Experience and INV International Scale-up," Journal of World Business, Elsevier, vol. 57(2).
    5. Shaker A. Zahra & Niron Hashai, 2022. "The effect of MNEs’ technology startup acquisitions on small open economies’ entrepreneurial ecosystems," Journal of International Business Policy, Palgrave Macmillan, vol. 5(3), pages 277-295, September.
    6. Fini, Riccardo & Perkmann, Markus & Kenney, Martin & Maki, Kanetaka M., 2023. "Are public subsidies effective for university spinoffs? Evidence from SBIR awards in the University of California system," Research Policy, Elsevier, vol. 52(1).
    7. Berger, Marius & Hottenrott, Hanna, 2021. "Start-up subsidies and the sources of venture capital," Journal of Business Venturing Insights, Elsevier, vol. 16(C).
    8. Guo, Di & Guo, Yan & Jiang, Kun, 2022. "Government R&D support and firms’ access to external financing: funding effects, certification effects, or both?," Technovation, Elsevier, vol. 115(C).
    9. Chapman, Gary & Hottenrott, Hanna, 2023. "Founder personality and start-up subsidies," ZEW Discussion Papers 23-008, ZEW - Leibniz Centre for European Economic Research.
    10. Berger, Marius & Gottschalk, Sandra, 2021. "Financing and advising early stage startups: The effect of angel investor subsidies," ZEW Discussion Papers 21-069, ZEW - Leibniz Centre for European Economic Research.
    11. Hottenrott, Hanna & Richstein, Robert, 2020. "Start-up subsidies: Does the policy instrument matter?," Research Policy, Elsevier, vol. 49(1).

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