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Persistence in R&D Performance and its Implications for the Granting of Subsidies

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  • Pere Arqué-Castells

Abstract

We study whether R&D subsidies can be used to encourage sustained R&D performance. To this end we measure the importance of true state dependence (TSD) in R&D performance and of subsidies’ inducement effects. Estimates that are based on a panel of Spanish manufacturing firms that are observed during the period 1998–2009 reveal that both magnitudes are positive and significant. Simulations that are carried out with the estimated parameters show that subsidies can generate permanent inducement effects for 9 % of Spanish manufacturing firms. The subsidy shares that are needed to generate permanent inducement effects among small firms (firms with fewer than 200 employees) are larger than those that are needed to generate permanent inducement effects among large firms (firms with 200 or more employees). Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Pere Arqué-Castells, 2013. "Persistence in R&D Performance and its Implications for the Granting of Subsidies," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(3), pages 193-220, November.
    • Handle: RePEc:kap:revind:v:43:y:2013:i:3:p:193-220
    DOI: 10.1007/s11151-013-9381-0
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    More about this item

    Keywords

    Dynamic discrete models; Persistence; R&D; Subsidies; H2; O2; C1; D2;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • D2 - Microeconomics - - Production and Organizations

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