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Assessing the Effectiveness of Innovation Grants – Evidence from the Irish Innovation Panel

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  • Stephen Roper

    ()

  • Nola Hewitt-Dundas

    ()

Abstract

Innovation grants are a ubiquitous feature of industrial support regimes across the industrial world. Evidence on their effectiveness is less widespread, however, due to a lack of consistent longitudinal or panel data on innovation outcomes and company performance. In this paper we investigate the effectiveness of R&D and innovation grants support in Ireland and Northern Ireland using panel data and a sample selection approach to the modelling of grant impacts. The study is based on the Irish Innovation Panel which provides panel data on the innovation activities of manufacturing firms in Ireland and Northern Ireland over the 1991-2002 period. The use of panel data allows us to investigate the medium to long-term effect of innovation grant support. In other words, we are able to identify whether the receipt of an innovation grant merely increases innovation activity in the short-term or has any lasting effect on either innovation capability or firms’ technological trajectory. The latter outcome is clearly desirable for any region or nation seeking to use innovation grants as a means of boosting long term competitiveness. The use of a sample selection approach allows us to identify separately the ‘selection’ and ‘assistance’ elements of the impact of any innovation grant. In other words, it allows us to control for the positive effects of any targeting of assistance on more innovative or better performing companies and isolate the ‘true’ effect of any innovation grant. To our knowledge this is the first time this approach has been used to assess the impact of innovation grant support although the technique has been used by the authors in a previous analysis of small business assistance. Our results suggest very different time profiles in terms of the benefits from product and process innovation grants suggesting alternative managerial and regional development strategies. Grant support is also found to have strong positive effects on innovation activity even allowing for a wide range of conditioning effects. Our results therefore suggest the continued value of innovation grant support as an element of regions’ industrial support regimes.

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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p478.

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Date of creation: Aug 2005
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Handle: RePEc:wiw:wiwrsa:ersa05p478

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  1. Elena Cefis & Luigi Orsenigo, 1998. "The Persistence of Innovative Activities. A Cross-Countries and Cross-Sectors Comparative Analysis," Department of Economics Working Papers 9804, Department of Economics, University of Trento, Italia.
  2. Martin, Stephen & Scott, John T., 2000. "The nature of innovation market failure and the design of public support for private innovation," Research Policy, Elsevier, vol. 29(4-5), pages 437-447, April.
  3. Malerba, Franco & Orsenigo, Luigi & Peretto, Pietro, 1997. "Persistence of innovative activities, sectoral patterns of innovation and international technological specialization," International Journal of Industrial Organization, Elsevier, vol. 15(6), pages 801-826, October.
  4. Brian Ashcroft & Stephen Roper & Stewart Dunlop & James H. Love, 2000. "Industry and location effects on UK plants' innovation propensity," The Annals of Regional Science, Springer, vol. 34(4), pages 489-502.
  5. Leon A.G. Oerlemans & Marius T.H. Meeus & Frans W.M. Boekema, 1998. "Do Networks Matter for Innovation? The usefulness of the economic network approach in analysing innovation," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 89(3), pages 298-309, 08.
  6. Bruno Crepon & Emmanuel Duguet & Jacques Mairessec, 1998. "Research, Innovation And Productivi[Ty: An Econometric Analysis At The Firm Level," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 7(2), pages 115-158.
  7. Love, James H. & Roper, Stephen, 2001. "Location and network effects on innovation success: evidence for UK, German and Irish manufacturing plants," Research Policy, Elsevier, vol. 30(4), pages 643-661, April.
  8. James Love & Stephen Roper, 1999. "The Determinants of Innovation: R & D, Technology Transfer and Networking Effects," Review of Industrial Organization, Springer, vol. 15(1), pages 43-64, August.
  9. Roper, Stephen & Love, James H., 2002. "Innovation and export performance: evidence from the UK and German manufacturing plants," Research Policy, Elsevier, vol. 31(7), pages 1087-1102, September.
  10. Oerlemans, L.A.G. & Meeus, M.T.H. & Boekema, F.W.M., 1998. "Do networks matter for innovation? The usefulness of the network approach in analysing innovation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-78820, Tilburg University.
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