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Do Subsidies to Commercial R&D Reduce Market Failures? Microeconomic Evaluation Studies

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Author Info
Tor Jakob Klette
Jarle Møen
Zvi Griliches

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Abstract

A number of market failures have been associated with R&D investments and significant amounts of public money have been spent on programs to stimulate innovative activities. In this paper, we review some recent microeconomic studies evaluating effects of government sponsored commercial R&D. We pay particular attention to the conceptual problems involved. Neither the firms receiving support, nor those not applying, constitute random samples. Furthermore, those not receiving support may be affected by the programs due to spillover effects which often are a main justification for R&D subsidies. Constructing a valid control group under these circumstances is challenging, and we relate our discussion to recent advances in econometric methods for evaluation studies based on non-experimental data. We also discuss some analytical questions that need to be addressed in order to assess whether R&D support schemes can be justified. For instance, what are the implication of firms' R&D investments being complementary to each other, and to what extent are potential R&D spillovers internalized in the market?

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6947.

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Date of creation: Feb 1999
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Handle: RePEc:nbr:nberwo:6947

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G30 - Financial Economics - - Corporate Finance and Governance - - - General
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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  1. Karl Aiginger & Michael Landesmann, 2002. "Competitive Economic Performance: The European View," WIFO Working Papers 179, WIFO. [Downloadable!]
  2. C. Halmenschlager, 2004. "Spillovers and Absorptive Capacity in a Patent Race," Working Papers ERMES 0409, ERMES, University Paris 2. [Downloadable!]
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  3. James D. Adams & Eric P. Chiang & Jeffrey L. Jensen, 2003. "The Influence of Federal Laboratory R&D on Industrial Research," Rensselaer Working Papers in Economics 0301, Rensselaer Polytechnic Institute, Department of Economics. [Downloadable!]
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  4. Lee G. Branstetter & Mariko Sakakibara, 2000. "When Do Research Consortia Work Well and Why? Evidence from Japanese Panel Data," NBER Working Papers 7972, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Czarnitzki, Dirk & Fier, Andreas, 2002. "Do Innovation Subsidies Crowd Out Private Investment? : Evidence from the German Service Sector," ZEW Discussion Papers 02-04, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  6. Brian Jacob & Lars Lefgren, 2007. "The Impact of Research Grant Funding on Scientific Productivity," NBER Working Papers 13519, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. José; Miguel Benavente H., 2004. "Technological Innovation In Chile Where We Are and What Can be Done," Working Papers Central Bank of Chile 295, Central Bank of Chile. [Downloadable!]
  8. Czarnitzki, Dirk & Licht, Georg, 2004. "Die Rolle der Innovationsförderung im Aufholprozess Ostdeutschlands," ZEW Discussion Papers 04-68, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  9. Takalo, Tuomas & Tanayama, Tanja & Toivanen, Otto, 2008. "Evaluating innovation policy: a structural treatment effect model of R&D subsidies," Research Discussion Papers 7/2008, Bank of Finland. [Downloadable!]
  10. Ari Hyytinen & Otto Toivanen, 2003. "Do Financial Constraints Hold Back Innovation and Growth? Evidence on the Role of Public Policy," Discussion Papers 820, The Research Institute of the Finnish Economy. [Downloadable!]
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  11. Joshua S. Gans & Scott Stern, 2000. "When Does Funding Research by Smaller Firms Bear Fruit?: Evidence from the SBIR Program," NBER Working Papers 7877, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Tomas J. Philipson, 2000. "External Treatment Effects and Program Implementation Bias," NBER Technical Working Papers 0250, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Josh Lerner, 2002. "When Bureaucrats Meet Entrepreneurs: The Design of Effective "Public Venture Capital" Programmes," Economic Journal, Royal Economic Society, vol. 112(477), pages F73-F84, February. [Downloadable!] (restricted)
  14. Stefano Breschi & Francesco Lissoni, 2001. "Knowledge spillovers and local innovation systems: a critical survey," LIUC Papers in Economics 84, Cattaneo University (LIUC). [Downloadable!]
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  15. Raffaello Bronzini & Guido De Blasio, 2005. "Evaluating the impact of investment incentives - the case of the Italian Law 488," ERSA conference papers ersa05p649, European Regional Science Association. [Downloadable!]
  16. Tuomas Takalo & Tanja Tanayama & Otto Toivanen, 2005. "Selection Or Self-Rejection? Applications Into A Treatment," Industrial Organization 0510002, EconWPA. [Downloadable!]
  17. Sanghoon Ahn, 2004. "Global Competition, Technology Spillovers and Firm Dynamics:," Econometric Society 2004 Far Eastern Meetings 793, Econometric Society. [Downloadable!]
  18. Paul Stoneman, 1999. "Government spending on research and development in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 20(3), pages 223-259, September. [Downloadable!]
  19. 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!]
  20. Kangasharju, Aki & Venetoklis, Takis, 2002. "Effect of business subsidies on labour demand: overall evaluation with regional extensions," ERSA conference papers ersa02p172, European Regional Science Association. [Downloadable!]
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