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Instrument policy mix and firm size: is there complementarity between R&D subsidies and R&D tax credits?

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  • Tea Petrin

    (University of Ljubljana)

  • Dragana Radicic

    (University of Lincoln)

Abstract

Nowadays, a rising number of evaluations investigates a multifaceted concept of the policy mix. Our study specifically focuses on the mix of two most frequently used supply-side instruments–R&D subsidies and R&D tax credits. Drawing on the longitudinal sample of Spanish manufacturing firms, we investigate whether there is a complementary interaction between these policy instruments with respect to product and process innovations. Moreover, by employing a dynamic random-effects probit estimator, we account for the persistence of innovation and endogeneity of public support. The results, that are separately estimated for SMEs and large firms, uniformly show evidence of no interplay between two policy instruments either in SMEs or large firms. However, among factors that influence the propensity to product and process innovations, by far, the largest effect is generated by true state dependence. These findings provide some policy implications for fostering product and process innovations in the long run.

Suggested Citation

  • Tea Petrin & Dragana Radicic, 2023. "Instrument policy mix and firm size: is there complementarity between R&D subsidies and R&D tax credits?," The Journal of Technology Transfer, Springer, vol. 48(1), pages 181-215, February.
    • Handle: RePEc:kap:jtecht:v:48:y:2023:i:1:d:10.1007_s10961-021-09908-8
    DOI: 10.1007/s10961-021-09908-8
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    Keywords

    Instrument policy mix; R&D subsidies; R&D tax credits; Persistence of innovation; SMEs; Spanish manufacturing;
    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
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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