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Picking the Winner? - Empirical Evidence on the Targeting of R&D Subsidies to Start-ups

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  • Uwe Cantner

    ()
    (Department of Economics, Friedrich Schiller University of Jena)

  • Sarah Kösters

    ()
    (DFG RTG 1411 "The Economics of Innovative Change", Friedrich Schiller University of Jena)

Abstract

This paper investigates the allocation of R&D subsidies given to start-ups. Considering the coexistence of various R&D project schemes, we take an aggregate view and analyze the determinants of the receipt of (any) R&D subsidies within the first three business years of the start-ups. We argue that policymakers and funding authorities follow a strategy of "picking the winner". Analyzing a unique data set of start-ups in the East German state of Thuringia, we conduct logistic regressions and find ambiguous support. R&D subsidies are given to start-ups with innovative business ideas, especially academic spin-offs. On the other hand, the ambitions and the patent stock of the founder(s) do not decide the receipt of R&D subsidies. These insights into the overall allocation of R&D subsidies are important since they have implications for policy effectiveness and efficiency. The implied difficulties of policy targeting fundamentally question the massive subsidization of private R&D.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2009-093.

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Date of creation: 09 Nov 2009
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Handle: RePEc:jrp:jrpwrp:2009-093

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Keywords: Start-ups; R&D subsidies; Subsidy allocation;

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  1. Eickelpasch, Alexander & Fritsch, Michael, 2005. "Contests for Cooperation: A New Approach in German Innovation Policy," Freiberg Working Papers 2005,03, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  2. Blanes, J. Vicente & Busom, Isabel, 2004. "Who participates in R&D subsidy programs?: The case of Spanish manufacturing firms," Research Policy, Elsevier, Elsevier, vol. 33(10), pages 1459-1476, December.
  3. Michael Fritsch, 2008. "How does new business formation affect regional development? Introduction to the special issue," Small Business Economics, Springer, Springer, vol. 30(1), pages 1-14, January.
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  6. Hall, Bronwyn H., 2002. "The Financing of Research and Development," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt34c1c643, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  7. Takalo, Tuomas & Tanayama, Tanja, 2008. "Adverse selection and financing of innovation: is there a need for R&D subsidies?," Research Discussion Papers, Bank of Finland 19/2008, Bank of Finland.
  8. Lundvall, Bengt-Ake & Johnson, Bjorn & Andersen, Esben Sloth & Dalum, Bent, 2002. "National systems of production, innovation and competence building," Research Policy, Elsevier, Elsevier, vol. 31(2), pages 213-231, February.
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  11. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press, vol. 16(3), pages 455-488, June.
  12. Uwe Cantner & Sarah Kösters, 2009. "R&D Subsidies to Start-ups - Effective Drivers of Patent Activity and Employment Growth?," Jena Economic Research Papers, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2009-027, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  13. Luukkonen, Terttu, 2000. "Additionality of EU framework programmes1," Research Policy, Elsevier, Elsevier, vol. 29(6), pages 711-724, June.
  14. Lerner, Josh, 1999. "The Government as Venture Capitalist: The Long-Run Impact of the SBIR Program," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 72(3), pages 285-318, July.
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Cited by:
  1. Simachev, Yuri & Kuzyk, Mikhail & Ivanov, Denis, 2012. "Fostering innovation in Russian companies in the post-crisis period: Opportunities and constraints," MPRA Paper 41284, University Library of Munich, Germany.

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