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Promoting Innovation: The Differential Impact of R&D Subsidies

Author

Listed:
  • Reda Cherif

    (University of Cambridge)

  • Christoph Grimpe

    (Copenhagen Business School and ZEW Leibniz Centre for European Economic Research)

  • Fuad Hasanov

    (Georgetown University, and Bennett Institute for Public Policy, University of Cambridge)

  • Wolfgang Sofka

    (Copenhagen Business School and University of Liverpool Management School)

Abstract

We investigate the effect of R&D subsidies on firms’ innovation by ownership, industry, and firm size using German firm-level data. The impact of R&D subsidies is heterogeneous across industries for multinational corporations (MNCs) and domestic firms. This heterogeneity is robust using various estimators. Domestic firms have a larger response in R&D spending in low-tech and medium-term manufacturing, while the effect in high-tech manufacturing is larger for both domestic and foreign MNCs. In knowledge-intensive services and technological services, the response of domestic firms and in some cases foreign MNCs, is greater than that of domestic MNCs. In terms of patents, foreign MNC subsidiaries tend to have a larger count in high-tech manufacturing.

Suggested Citation

  • Reda Cherif & Christoph Grimpe & Fuad Hasanov & Wolfgang Sofka, 2023. "Promoting Innovation: The Differential Impact of R&D Subsidies," Journal of Industry, Competition and Trade, Springer, vol. 23(3), pages 187-241, December.
    • Handle: RePEc:kap:jincot:v:23:y:2023:i:3:d:10.1007_s10842-023-00400-7
    DOI: 10.1007/s10842-023-00400-7
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    More about this item

    Keywords

    Innovation; Patents; Research and development; R&D; Subsidies; Multinationals; Investment; Technology policy;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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