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R&D Subsidies and Private Sector Innovativeness: New Empirical Evidence for East German Firms

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  • Janina Reinkowski

    ()

  • Timo Mitze

    ()

  • Björn Alecke
  • Gerhard Untiedt

Abstract

We analyse the effect of public Research and Development (R&D) subsidies on private sector innovativeness for a cross-section of East German firms applying different matching estimations, which are primary based on an estimate of a propensity score. To do so, we use a until now unexplored representative database for the federal state of Thuringia covering around 1500 firm and the period 2001 to 2003. From a methodological perspective we apply a two-step microeconometric policy evaluation approach that estimates a probit equation for R&D programme participation in a first step and then uses the fitted values (the so called propensity score) in a second step matching approach. Here we compare the outcome difference of subsidized and non-subsidized firms for a broad set of private sector R&D variables such as general patenting activity, total number of patents, R&D expenditure and employment as well as R&D intensity (defined as R&D expenditures relative to total turnover). Our empirical results indicate that the treated firms indeed show a significantly higher research activity measured in terms of R&D intensity and patent application. With respect to R&D intensity for instance this difference is estimated to vary between 4 to 5 percentage points. Our findings thus give support to earlier evidence for East Germany, which so far have been solely based on the Mannheim Innovation Panel (MIP) as the only database accessible for analyses on the role of public policy in the innovation process of German firms. Our empirical results for Thuringia pass a variety of robustness checks based on different estimation routines (Kernel, Mahalanobis distance) and additional matching criteria beyond the propensity score (such as same industry code as well as size group). We also perform sensitivity checks for subgroups of the sample, e.g. we include only those firms who regularly engage in R&D activity. All results hint at the positive stimulus given by public R&D subsidies to enhance the private sector innovativeness.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa10p1071.

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Date of creation: Sep 2011
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Handle: RePEc:wiw:wiwrsa:ersa10p1071

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  1. Xulia Gonz�lez & Jordi Jaumandreu & Consuelo Pazo, 2005. "Barriers to Innovation and Subsidy Effectiveness," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 930-949, Winter.
  2. José García-Quevedo, 2004. "Do Public Subsidies Complement Business R&D? A Meta-Analysis of the Econometric Evidence," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 57(1), pages 87-102, 02.
  3. Guido W. Imbens, 2003. "Nonparametric Estimation of Average Treatment Effects under Exogeneity: A Review," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0294, National Bureau of Economic Research, Inc.
  4. María Callejón & José García Quevedo, 2002. "Las ayudas a la I+D empresarial. Un an lisis sectorial," Working Papers, Institut d'Economia de Barcelona (IEB) 2002/6, Institut d'Economia de Barcelona (IEB).
  5. Levy, David M., 1990. "Estimating the impact of government R&D," Economics Letters, Elsevier, Elsevier, vol. 32(2), pages 169-173, February.
  6. Michael Lechner, 2002. "Some practical issues in the evaluation of heterogeneous labour market programmes by matching methods," Journal of the Royal Statistical Society Series A, Royal Statistical Society, Royal Statistical Society, vol. 165(1), pages 59-82.
  7. Aerts, Kris & Schmidt, Tobias, 2006. "Two for the price of one? On additionality effects of R&D subsidies: A comparison between Flanders and Germany," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 06-63, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Bruno Van Pottelsberghe & Dominique Guellec, 2001. "R&D and productivity growth: a panel data analysis of 16 OECD countries," ULB Institutional Repository, ULB -- Universite Libre de Bruxelles 2013/6219, ULB -- Universite Libre de Bruxelles.
  9. Dominique Guellec & Bruno Van Pottelsberghe, 2004. "From R&D to Productivity Growth: Do the Institutional Settings and the Source of Funds of R&D Matter?," Working Papers CEB, ULB -- Universite Libre de Bruxelles 04-010.RS, ULB -- Universite Libre de Bruxelles.
  10. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, Elsevier, vol. 80(1), pages 123-129, July.
  11. Maryann Feldman, 1999. "The New Economics Of Innovation, Spillovers And Agglomeration: Areview Of Empirical Studies," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 8(1-2), pages 5-25.
  12. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(4), pages 605-54, October.
  13. DUGUET Emmanuel, 2004. "Are R&D subsidies a substitute or a complement to privately funded R&D? Evidence from France using propensity score methods for non- experimental data," Public Economics, EconWPA 0411007, EconWPA.
  14. Czarnitzki, Dirk & Fier, Andreas, 2002. "Do Innovation Subsidies Crowd Out Private Investment? Evidence from the German Service Sector," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 02-04, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  15. Arthur M. Diamond, 1999. "Does Federal Funding "Crowd In" Private Funding Of Science?," Contemporary Economic Policy, Western Economic Association International, Western Economic Association International, vol. 17(4), pages 423-431, October.
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