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Evaluating the robustness of the effect of public subsidies on firms’ R&D: an application to Italy

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Abstract

This paper applies different econometric methods to evaluate the effect of public subsidies on firms’ R&D activity. For the sake of robustness, results from the Heckman selection model (Heckit), Control-function regression, Difference-in-differences, and various Matching methods are compared by using the third and fourth wave of the Italian Community Innovation Survey (CIS3, years 1998-2000 and CIS4, years 2002-2004). We predict the absence of a full crowding-out of private R&D performance, both for the whole sample and for some subsets of firms. Nevertheless, we conclude that while for variables expressed as ratio (R&D intensity and R&D per employee) the difference in results is negligible, R&D expenditure presents a strong variability among the approaches, even for those relying on similar identification assumptions. Given the utmost importance of this target-variable, future works should go beyond the use of single methods, especially when they are thought of to steer future policymaking.

Suggested Citation

  • Giovanni Cerulli & Bianca Potì, 2012. "Evaluating the robustness of the effect of public subsidies on firms’ R&D: an application to Italy," Journal of Applied Economics, Universidad del CEMA, vol. 15, pages 287-320, November.
    • Handle: RePEc:cem:jaecon:v:15:y:2012:n:2:p:287-320
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    Cited by:

    1. Deokho Cho & Kyunghee Choi, 2014. "The Effects of the Government Research and Development Support Policies on the Local Firm's Innovative Performance," ERSA conference papers ersa14p6, European Regional Science Association.
    2. Previati, Daniele Angelo & Galloppo, Giuseppe & Aliano, Mauro & Paimanova, Viktoria, 2021. "Why do banks react differently to short-selling bans? Evidence from the Asia-Pacific area and the United States," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 144-158.
    3. Emmanuel Chavez, 2020. "The Effects of Public R&D Subsidies on Private R&D Activities in Mexico," Working Papers halshs-02355106, HAL.
    4. Claudio Petti & Lauretta Rubini & Silvia Podetti, 2017. "Government Support and R&D Investment Effectiveness in Chinese SMEs: A Complex Relationship," Asian Economic Papers, MIT Press, vol. 16(1), pages 201-226, Winter/Sp.
    5. Tim Buyse & Freddy Heylen & Ruben Schoonackers, 2015. "On The Role Of Public Policies And Wage Formation For Private Investment In R&D: A Long-Run Panel Analysis," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 15/911, Ghent University, Faculty of Economics and Business Administration.
    6. Beck, Mathias & Junge, Martin & Kaiser, Ulrich, 2017. "Public Funding and Corporate Innovation," IZA Discussion Papers 11196, Institute of Labor Economics (IZA).
    7. Ascensión Barajas & Elena Huergo & Lourdes Moreno Martín, 2017. "Public Support to Business R&D and the Economic Crisis: Spanish Evidence," Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales 17-03, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
    8. Chiara Bocci & Marco Mariani, 2015. "L’approccio delle funzioni dose-risposta per la valutazione di trattamenti continui nei sussidi alla r&s," SCIENZE REGIONALI, FrancoAngeli Editore, vol. 2015(3 Suppl.), pages 81-102.
    9. Bettina Becker, 2015. "Public R&D Policies And Private R&D Investment: A Survey Of The Empirical Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 917-942, December.
    10. Huergo, Elena & Moreno, Lourdes, 2017. "Subsidies or loans? Evaluating the impact of R&D support programmes," Research Policy, Elsevier, vol. 46(7), pages 1198-1214.
    11. Lenihan, Helena & Mulligan, Kevin & Doran, Justin & Rammer, Christian & Ipinnaiye, Olubunmi, 2022. "R&D grant and tax credit support for foreign-owned subsidiaries: Does it pay off?," ZEW Discussion Papers 22-003, ZEW - Leibniz Centre for European Economic Research.
    12. Aristei, David & Sterlacchini, Alessandro & Venturini, Francesco, 2015. "The effects of public supports on business R&D: firm-level evidence across EU countries," MPRA Paper 64611, University Library of Munich, Germany.
    13. Archibugi, Daniele & Filippetti, Andrea, 2018. "The retreat of public research and its adverse consequences on innovation," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 97-111.
    14. Beck, Mathias & Lopes-Bento, Cindy & Schenker-Wicki, Andrea, 2016. "Radical or incremental: Where does R&D policy hit?," Research Policy, Elsevier, vol. 45(4), pages 869-883.
    15. Emmanuel Chavez, 2020. "The Effects of R&D Tax Credits and Subsidies onPrivate R&D in Mexico (Chapter 2)," Working Papers halshs-02652063, HAL.
    16. David Aristei & Alessandro Sterlacchini & Francesco Venturini, 2017. "Effectiveness of R&D subsidies during the crisis: firm-level evidence across EU countries," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 26(6), pages 554-573, August.
    17. Bettina Becker, 2013. "The Determinants of R&D Investment: A Survey of the Empirical Research," Discussion Paper Series 2013_09, Department of Economics, Loughborough University, revised Sep 2013.
    18. Marco Mariani & Fabrizia Mealli, 2018. "The Effects of R&D Subsidies to Small and Medium-Sized Enterprises. Evidence from a Regional Program," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(2), pages 249-281, July.
    19. Emanuele Brancati & Raffaele Brancati & Dario Guarascio & Andrea Maresca & Manuel Romagnoli & Antonello Zanfei, 2018. "Firm-level Drivers of Export Performance and External Competitiveness in Italy," European Economy - Discussion Papers 2015 - 087, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    20. Bianchini, Stefano & Llerena, Patrick & Martino, Roberto, 2019. "The impact of R&D subsidies under different institutional frameworks," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 65-78.
    21. Heijs, Joost & Guerrero, Alex J. & Huergo, Elena, 2020. "Matching methods for impact evaluation of public subsidies to business R&D: Measuring heterogeneous effects," MPRA Paper 103874, University Library of Munich, Germany.
    22. Huergo, Elena & Trenado, Mayte & Ubierna, Andrés, 2016. "The impact of public support on firm propensity to engage in R&D: Spanish experience," Technological Forecasting and Social Change, Elsevier, vol. 113(PB), pages 206-219.
    23. Bucci, Valeria, 2019. "The Effect of Fiscal Incentives on Business R&D," MPRA Paper 95333, University Library of Munich, Germany.
    24. Dai, Xiaoyong & Cheng, Liwei, 2015. "The effect of public subsidies on corporate R&D investment: An application of the generalized propensity score," Technological Forecasting and Social Change, Elsevier, vol. 90(PB), pages 410-419.
    25. Andrea Bellucci & Luca Pennacchio & Alberto Zazzaro, 2016. "Public subsidies for SME research and development: Empirical evaluation of collaborative versus individual place-based programs," Mo.Fi.R. Working Papers 133, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

    More about this item

    Keywords

    business R&D; public incentives; econometric evaluation; robustness;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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