Do Subsidies to Commercial R&D Reduce Market Failures? Microeconomic Evaluation Studies
AbstractA 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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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6947.
Date of creation: Feb 1999
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Publication status: published as Research Policy, vol.29 (4-5), pp. 471-495, 2000.
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Other versions of this item:
- Tor Jakob Klette & Jarle Moen & Zvi Griliches, 1999. "Do Subsidies to Commercial R&D Reduce Market Failures - Microeconomic Evaluation Studies?," Harvard Institute of Economic Research Working Papers 1861, Harvard - Institute of Economic Research.
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-02-15 (All new papers)
- NEP-PUB-1999-02-15 (Public Finance)
- NEP-TID-1999-02-15 (Technology & Industrial Dynamics)
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