Advanced Search
MyIDEAS: Login to save this paper or follow this series

When do R&D subsidies boost innovation? Revisiting the inverted U-shape

Contents:

Author Info

  • Kilponen , Juha

    ()
    (Bank of Finland Research)

  • Santavirta, Torsten

    ()
    (Helsinki School of Economics)

Abstract

We show theoretically that a proportional R&D subsidy accelerates innovation activity at all degrees of competition in the modern Schumpeterian growth model, but less so at high degrees of competition. We then use company-level data on patenting activity, product market competition and R&D subsidies of Finnish firms during 1990–2001 to test the theoretical prediction. The empirical findings can be summarized as follows. Firstly, we find relatively strong evidence in favour of the inverted U-shape between competition and innovation. Secondly, we find some evidence that a direct R&D subsidy increases innovative activity at all but very high degrees of competition. This can be interpreted so mean that the R&D subsidy reinforces the Schumpeterian effect due to the negative cross-effect of R&D subsidy and competition. This is evident from the finding that an increase in the R&D subsidy steepens the inverted U relationship when competition is fierce.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0710netti.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 10/2007.

as in new window
Length: 30 pages
Date of creation: 12 Sep 2007
Date of revision:
Handle: RePEc:hhs:bofrdp:2007_010

Contact details of provider:
Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
More information through EDIRC

Related research

Keywords: competition; innovation; R&D subsidies; patents;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Correa, Paulo & Andres, Luis & Borja-Vega, Christian, 2013. "The impact of government support on firm R&D investments : a meta-analysis," Policy Research Working Paper Series 6532, The World Bank.
  2. Patrik Gustavsson Tingvall & Patrik Karpaty, 2011. "Service-sector competition, innovation and R&D," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(1), pages 63-88.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hhs:bofrdp:2007_010. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Minna Nyman).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.