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When subsidized R&D-firms fail, do they still stimulate growth? Tracing knowledge by following employees across firms

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Public R&D subsidies aim to target particularly risky R&D and R&D with large externalities. One would expect many such projects to fail from a commercial point of view, but they may still produce knowledge with social value. Such knowledge is likely to be embodied in workers or teams of workers. I utilize a large matched employer-employee data set and test for knowledge diffusion from subsidised technology firms transmitted through the labor market. The specific case analysed is a series of Norwegian IT-programs so far considered unsuccessful, but which have been linked to the rise of a new generation of successful IT-firms. It has been argued that know-how and networks built up in leading companies during the programs still `fertilize' the IT-industry even though many of the companies have exited. I find limited support for this claim. On the positive side, the market value of work experience from subsidized firms does not seem to have been reduced by the fact that the firms did not succeed commercially, but workers from subsidized firms have not outperformed similar workers without this experience, either. Furthermore, firms that are spin-offs from formerly subsidized firms seem to perform below, rather than above average.

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Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 399.

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Date of creation: Dec 2004
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Handle: RePEc:ssb:dispap:399

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Keywords: R&D-subsidies; Knowledge spillovers; Human capital; Labor mobility; Displaced workers; Spin-off firms; IT-industry; Program evaluation; Matched employer-employee data;

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  1. Paul Almeida & Bruce Kogut, 1999. "Localization of Knowledge and the Mobility of Engineers in Regional Networks," Management Science, INFORMS, INFORMS, vol. 45(7), pages 905-917, July.
  2. Trajtenberg, M. & Bresnahan, T.F., 1992. "General Purpose Technologies: "Engines of Growth"," Papers, Tel Aviv 16-92, Tel Aviv.
  3. Jarle Møen, 2000. "Is Mobility of Technical Personnel a Source of R&D Spillovers?," NBER Working Papers 7834, National Bureau of Economic Research, Inc.
  4. Tor Jakob Klette & Jarle Møen, 1998. "From Growth Theory to Technology Policy – Coordination Problems in Theory and Practice," Discussion Papers, Research Department of Statistics Norway 219, Research Department of Statistics Norway.
  5. Scott Stern, 1999. "Do Scientists Pay to Be Scientists?," NBER Working Papers 7410, National Bureau of Economic Research, Inc.
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