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The role of public loans in financing business R&D through the economic cycle

Author

Listed:
  • Ascensión Barajas

    (CDTI (Centre for the Development of Industrial Technology))

  • Elena Huergo

    (Universidad Complutense de Madrid
    Universidad Complutense de Madrid)

  • Lourdes Moreno

    (Universidad Complutense de Madrid)

Abstract

Should governments increase their efforts in R&D public funding during recession periods? The objective of the present study is to compare the effect of public aid to business R&D on technological inputs and outputs through the economic cycle. We contribute to this literature by examining the effect of one specific instrument of direct public support: selective loans for firms’ R&D projects. For the analysis, we consider Spanish firms supported through this kind of instrument for the periods 2002–2005 and 2010–2012. Our results suggest that the hypothesis of full crowding out of private R&D is rejected in both cycle periods, expansion and recession: public support has positive effects on the resources devoted to R&D activities. However, the effect of public support on some technological outputs depends on the cycle phase: firms supported by selective loans during the crisis are more likely to obtain product innovations.

Suggested Citation

  • Ascensión Barajas & Elena Huergo & Lourdes Moreno, 2021. "The role of public loans in financing business R&D through the economic cycle," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(2), pages 505-538, July.
    • Handle: RePEc:spr:epolit:v:38:y:2021:i:2:d:10.1007_s40888-021-00225-9
    DOI: 10.1007/s40888-021-00225-9
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    Cited by:

    1. Mitze, Timo & Makkonen, Teemu, 2023. "Can large-scale RDI funding stimulate post-crisis recovery growth? Evidence for Finland during COVID-19," Technological Forecasting and Social Change, Elsevier, vol. 186(PB).
    2. Perez-Alaniz, Mauricio & Lenihan, Helena & Doran, Justin & Rammer, Christian, 2024. "Subsidising innovation outside or within firms' existing knowledge base: Which is best for radical innovation?," ZEW Discussion Papers 24-007, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    Impact assessment; Economic crisis; Public aid; Business R&D;
    All these keywords.

    JEL classification:

    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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