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The possible adverse impact of innovation subsidies: some evidence from Italy

Author

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  • Alessandra Catozzella

    (Università Cattolica del Sacro Cuore)

  • Marco Vivarelli

    (Università Cattolica del Sacro Cuore
    University of Sussex
    Institute for the Study of Labour (IZA))

Abstract

The impact of public funding on innovative productivity is estimated using a sample of Italian firm-level data (CIS3). A bivariate endogenous switching model is developed in order to free the analysis of the sources of sample selection and firm heterogeneity, the possible simultaneity between subsidy allocation and the qualitative composition of the innovative output, as well as the endogeneity of public support with respect to innovative performance. Results show that innovative productivity is negatively affected by the subsidy; as a result of government intervention, supported firms appear to exhaust their advantage through merely increasing their innovative expenditures.

Suggested Citation

  • Alessandra Catozzella & Marco Vivarelli, 2016. "The possible adverse impact of innovation subsidies: some evidence from Italy," International Entrepreneurship and Management Journal, Springer, vol. 12(2), pages 351-368, June.
    • Handle: RePEc:spr:intemj:v:12:y:2016:i:2:d:10.1007_s11365-014-0342-3
    DOI: 10.1007/s11365-014-0342-3
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    Cited by:

    1. Richard Harris & John Moffat, 2020. "The impact of product subsidies on plant‐level total factor productivity in Britain, 1997–2014," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(4), pages 387-403, September.
    2. Chen Zhao & Feng Feng, 2023. "Do parent organizations influence R&D decisions of academic spin‐offs?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 43-57, January.
    3. Haiyan Wang & Yasinjan Sawur, 2022. "The Relationships between Government Subsidies, Innovation Input, and Innovation Output: Evidence from the New Generation of Information Technology Industry in China," Sustainability, MDPI, vol. 14(21), pages 1-22, October.
    4. Irina A. Morozova & Elena G. Popkova & Tatiana N. Litvinova, 2019. "Sustainable development of global entrepreneurship: infrastructure and perspectives," International Entrepreneurship and Management Journal, Springer, vol. 15(2), pages 589-597, June.
    5. Mei Feng & Ye Wang, 2023. "More Government Subsidies, More Innovation of New Energy Firms? Evidence from China," Sustainability, MDPI, vol. 15(11), pages 1-23, May.
    6. Lili Jia & Eunyoung Nam & Dongphil Chun, 2021. "Impact of Chinese Government Subsidies on Enterprise Innovation: Based on a Three-Dimensional Perspective," Sustainability, MDPI, vol. 13(3), pages 1-22, January.
    7. Agata Sudolska & Justyna Łapińska, 2020. "Exploring Determinants of Innovation Capability in Manufacturing Companies Operating in Poland," Sustainability, MDPI, vol. 12(17), pages 1-21, August.
    8. Blind, Knut & Petersen, Sören S. & Riillo, Cesare A.F., 2017. "The impact of standards and regulation on innovation in uncertain markets," Research Policy, Elsevier, vol. 46(1), pages 249-264.
    9. Shuang Huang & Abraham Y. Nahm & Zengji Song, 2023. "Government subsidies of new energy vehicle industry and enterprise innovation: Moderating role of chief executive officers' technical background," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2137-2147, June.
    10. Davide Antonioli & Sandro Montresor, 2021. "Innovation persistence in times of crisis: an analysis of Italian firms," Small Business Economics, Springer, vol. 56(4), pages 1739-1764, April.
    11. Kesen Zhang & Zhen Pan & Mukund Janardhanan & Imran Patel, 2023. "Relationship analysis between greenwashing and environmental performance," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(8), pages 7927-7957, August.
    12. Shiyuan Liu & Jiang Du & Weike Zhang & Xiaoli Tian, 2021. "Opening the box of subsidies: which is more effective for innovation?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 421-449, September.
    13. Chih-Hai Yang, 2023. "R&D responses to labor cost shock in China: does firm size matter?," Small Business Economics, Springer, vol. 61(4), pages 1773-1793, December.
    14. Chiara Bocci & Annalisa Caloffi & Marco Mariani & Alessandro Sterlacchini, 2023. "Evaluating Public Support to the Investment Activities of Business Firms: A Multilevel Meta-Regression Analysis of Italian Studies," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(1), pages 1-34, March.
    15. Santos, Anabela, 2019. "Do selected firms show higher performance? The case of Portugal’s innovation subsidy," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 39-50.
    16. Weidong Meng & Ye Wang & Yuyu Li & Bo Huang, 2020. "Impact of product subsidies on R&D investment for new energy vehicle firms: Considering quality preference of the early adopter group," PLOS ONE, Public Library of Science, vol. 15(7), pages 1-14, July.
    17. Manzhi Liu & Liyuan Liu & Shichun Xu & Mingwei Du & Xianxian Liu & Yanqin Zhang, 2019. "The Influences of Government Subsidies on Performance of New Energy Firms: A Firm Heterogeneity Perspective," Sustainability, MDPI, vol. 11(17), pages 1-20, August.
    18. Xing Gao & Ying Wang, 2023. "Competitive analysis of R&D investment with R&D budget constraint and R&D uncertainty," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2438-2456, June.
    19. Cátia Rosário & Celeste Varum & Anabela Botelho, 2022. "Impact of Public Support for Innovation on Company Performance: Review and Meta-Analysis," Sustainability, MDPI, vol. 14(8), pages 1-16, April.
    20. Jugend, Daniel & Fiorini, Paula De Camargo & Armellini, Fabiano & Ferrari, Aline Gabriela, 2020. "Public support for innovation: A systematic review of the literature and implications for open innovation," Technological Forecasting and Social Change, Elsevier, vol. 156(C).
    21. L. Colombo & H. Dawid & M. Piva & M. Vivarelli, 2017. "Does easy start-up formation hamper incumbents’ R&D investment?," Small Business Economics, Springer, vol. 49(3), pages 513-531, October.
    22. Martin Falk & Eva Hagsten, 2021. "Innovation intensity and skills in firms across five European countries," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 371-394, September.
    23. Abdelfeteh Bitat, 2018. "Environmental regulation and eco-innovation: the Porter hypothesis refined," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 8(3), pages 299-321, September.
    24. Bingqiang Li & Shan Wang & Nannan Dong & Jinzhi Li & Xi Li & He Yu, 2023. "Empirical Analysis of Subsidy Industrial Policy’s Effect on Export Innovation in the Chinese Manufacturing," SAGE Open, , vol. 13(4), pages 21582440231, November.

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    More about this item

    Keywords

    Innovation subsidy; Policy evaluation; Product innovation; Bivariate endogenous switching model;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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