Beyond Additionality: Are Innovation Subsidies Counterproductive?
AbstractBuilding on a standard policy evaluation literature mainly aimed at estimating the additional effect of subsidies on either firms' innovative expenditures or innovative outputs only, this paper tries to move one step further, combining the two (input and output) dimensions of innovation into a unique efficiency perspective. To this aim, the impact of public funding on the ratio between innovative sales and innovative expenditures (innovative productivity) is estimated using a sample of firm-level data drawn from the third Italian Community Innovation Survey (CIS). A bivariate endogenous switching model has been developed in order to free the analysis of any ex ante sources of sample selection and firm heterogeneity, at the same time getting rid of the two sources of endogeneity potentially affecting the results, i.e. 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 innovation subsidy; far from 'doing better' as a result of government intervention, supported firms appear to exhaust their advantage through merely increasing their innovative expenditures.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5746.
Length: 27 pages
Date of creation: May 2011
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Find related papers by JEL classification:
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-18 (All new papers)
- NEP-EFF-2011-06-18 (Efficiency & Productivity)
- NEP-INO-2011-06-18 (Innovation)
- NEP-KNM-2011-06-18 (Knowledge Management & Knowledge Economy)
- NEP-SBM-2011-06-18 (Small Business Management)
- NEP-TID-2011-06-18 (Technology & Industrial Dynamics)
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.:
- Charles BÃ©rubÃ© & Pierre Mohnen, 2007.
"Are Firms That Received R&D Subsidies More Innovative?,"
CIRANO Working Papers, CIRANO
- Charles BÃ©rubÃ© & Pierre Mohnen, 2009. "Are firms that receive R&D subsidies more innovative?," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 42(1), pages 206-225, February.
- Mohnen, Pierre & BÃ©rubÃ©, Charles, 2007. "Are Firms That Received R&D Subsidies More Innovative?," MERIT Working Papers 015, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Richard Blundell & Monica Costa Dias, 2000. "Evaluation methods for non-experimental data," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 21(4), pages 427-468, January.
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