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The Impact Of Public R&D Expenditure On Business R&D

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Author Info
DOMINIQUE GUELLEC
BRUNO VAN POTTELSBERGHE DE LA POTTERIE

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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.

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

Volume (Year): 12 (2003)
Issue (Month): 3 (January)
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 listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  3. 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. [Downloadable!] (restricted)
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  6. 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. [Downloadable!] (restricted)
  7. Austan Goolsbee, 1998. "Does Government R&D Policy Mainly Benefit Scientists and Engineers?," NBER Working Papers 6532, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Keane, Michael P & Runkle, David E, 1992. "On the Estimation of Panel-Data Models with Serial Correlation When Instruments Are Not Strictly Exogenous," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(1), pages 1-9, January.
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  12. Lichtenberg, Frank R, 1984. "The Relationship between Federal Contract R&D and Company R&D," American Economic Review, American Economic Association, vol. 74(2), pages 73-78, May.
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  15. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November. [Downloadable!] (restricted)
  16. Levy, David M., 1990. "Estimating the impact of government R&D," Economics Letters, Elsevier, vol. 32(2), pages 169-173, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mª Beatriz Corchuelo Martínez-Azúa & Ester Martínez Ros, 2008. "Application of R & D fiscal incentives in Spanish manufacturing firms," Hacienda Pública Española, IEF, vol. 187(4), pages 9-39, December. [Downloadable!]
  2. Spyros Arvanitis & Nora Sydow & Martin Woerter, 2005. "Is There Any Impact of University-Industry Knowledge Transfer on the Performance of Private Enterprises? – An Empirical Analysis Based¨on Swiss Firm Data," KOF Working papers 05-117, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
  3. Claudio Bravo Ortega & Álvaro García Marín, 2008. "Exploring the Relationship Between R&D and Productivity: A Country-Level Study," Working Papers Central Bank of Chile 472, Central Bank of Chile. [Downloadable!]
  4. Bruno Van Pottelsberghe, 2004. "Les politiques de science et technologie et l’objectif de Lisbonne," Working Papers CEB 04-011.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
    Other versions:
  5. Jyrki Ali-Yrkkö, 2004. "Impact of Public R&D Financing on Private R&D - Does Financial Constraint Matter?," Discussion Papers 943, The Research Institute of the Finnish Economy. [Downloadable!]
  6. Spyros Arvanitis & Nora Sydow & Martin Woerter, 2008. "Is there any Impact of University–Industry Knowledge Transfer on Innovation and Productivity? An Empirical Analysis Based on Swiss Firm Data," Review of Industrial Organization, Springer, vol. 32(2), pages 77-94, March. [Downloadable!] (restricted)
  7. Hannu Piekkola, 2005. "Public Funding of R&D and Growth: Firm-level Evidence from Finland," Discussion Papers 996, The Research Institute of the Finnish Economy. [Downloadable!]
  8. Jyrki Ali-Yrkkö, 2005. "Impact of Public R&D Financing on Private R&D: Does Financial Constraint Matter?," Economics Working Papers 030, European Network of Economic Policy Research Institutes. [Downloadable!]
  9. Martin Falk, 2004. "What Drives Business R&D Intensity Across OECD Countries?," WIFO Working Papers 236, WIFO. [Downloadable!]
  10. Alexander Coad & Rekha Rao, 2007. "Firm Growth and R&D Expenditure," Papers on Economics and Evolution 2007-10, Max Planck Institute of Economics, Evolutionary Economics Group. [Downloadable!]
  11. Alberto Melo, 2001. "The Innovation Systems of Latin America and the Caribbean," RES Working Papers 4283, Inter-American Development Bank, Research Department. [Downloadable!]
  12. Heshmati, Almas & Loof, Hans, 2005. "The Impact of Public Funds on Private R&D Investment: New Evidence from a Firm Level Innovation Study," Discussion Papers 11862, MTT Agrifood Research Finland. [Downloadable!]
  13. Gelauff, George & Lejour, Arjan, 2006. "The new Lisbon Strategy: An estiamtion of the impact of reaching 5 Lisbon targets," MPRA Paper 16168, University Library of Munich, Germany. [Downloadable!]
  14. Chu, Angus C. & Lai, Ching-Chong, 2009. "On the Growth and Welfare Effects of Defense R&D," MPRA Paper 16325, University Library of Munich, Germany. [Downloadable!]
  15. Azèle Mathieu & Bruno Van Pottelsberghe, 2008. "A note on the drivers of R&D intensity," Working Papers CEB 08-002.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
    Other versions:
  16. Dominique Guellec & Bruno Van Pottelsberghe, 2004. "From R&D to Productivity Growth: Do the Institutional Settings and the Source of Funds of R&D Matter?," Working Papers CEB 04-010.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
    Other versions:
  17. Svensson, Roger, 2008. "Renewal of Patents and Government Financing," Working Paper Series 759, Research Institute of Industrial Economics. [Downloadable!]
  18. Sabine Visser, 2007. "R&D in WorldScan," CPB Memoranda 189, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  19. Erdal Atukeren, 2005. "R&D Races and Spillovers between the EU and the US: Some Causal Evidence," KOF Working papers 05-105, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
  20. Alberto Melo, 2001. "Los sistemas de innovación en América Latina y el Caribe," RES Working Papers 4284, Inter-American Development Bank, Research Department. [Downloadable!]
  21. Toole, Andrew A., 2005. "Does Public Scientific Research Complement Industry R&D Investment? The Case of NIH Supported Basic and Clinical Research and Pharmaceutical Industry R&D," ZEW Discussion Papers 05-75, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  22. Volker Grossmann, 2004. "How to Promote R&D-based Growth? Public Education Expenditure on Scientists and Engineers versus R&D Subsidies," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  23. Czarnitzki, Dirk & Fier, Andreas, 2001. "Do R&D subsidies matter? : Evidence for the German service sector," ZEW Discussion Papers 01-19, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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