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The impact of public R&D expenditure on business R&D

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  • Dominique Guellec
  • Bruno Van Pottelsberghe De La Potterie

Abstract

This paper attempts to quantify the aggregate net effect of government funding on business R&D in 17 OECD Member countries over the past two decades. Grants, procurement, tax incentives and direct performance of research (in public laboratories or universities) are the major policy tools in the field. The major results of the study are the following: Direct government funding of R&D performed by firms has a positive effect on business financed R&D (except if the funding is targeted towards defence activities). Tax incentives have an immediate and positive effect on business-financed R&D; Direct funding as well as tax incentives are more effective when they are stable over time: firms do not invest in additional R&D if they are uncertain of the durability of the government support; Direct government funding and R&D tax incentives are substitutes: increased intensity of one reduces the effect of the other on business R&D; The stimulating effect of government funding varies with respect to its generosity: it increases up to a certain threshold (about 10% of business R&D) and then decreases beyond; Defence research performed in public laboratories and universities crowds out private R&D; Civilian public research is neutral for business R&D. * We thank the participants to various seminars, including the OECD Committee for Scientific and Technology Policy and the NBER 2000 Summer Institute on Productivity for helpful comments and suggestions. All opinions expressed in this article are those of the authors and do not reflect necessarily the views of the OECD or Universite Libre de Bruxelles.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 12 (2003)
Issue (Month): 3 ()
Pages: 225-243

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Handle: RePEc:taf:ecinnt:v:12:y:2003:i:3:p:225-243

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Related research

Keywords: Technology Policy; Tax Credit; R&D; Panel Data;

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References

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  1. Carmichael, Jeffrey, 1981. "The Effects of Mission-Oriented Public R&D Spending on Private Industry," Journal of Finance, American Finance Association, vol. 36(3), pages 617-27, June.
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  11. Austan Goolsbee, 1998. "Does Government R&D Policy Mainly Benefit Scientists and Engineers?," NBER Working Papers 6532, National Bureau of Economic Research, Inc.
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  14. David, P.A. & Hall, B.H., 1999. "Heart of Darkness: Public-Private Interaction Inside the R&D Black Box," Economics Papers 1999-w16, Economics Group, Nuffield College, University of Oxford.
  15. Bronwyn Hall, 1992. "R&D Tax Policy During the Eighties: Success or Failure?," NBER Working Papers 4240, National Bureau of Economic Research, Inc.
  16. Adams, James D, 1990. "Fundamental Stocks of Knowledge and Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 673-702, August.
  17. Switzer, Lorne, 1984. "The Determinants of Industrial R&D: A Funds Flow Simultaneous Equation Approach," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 163-68, February.
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