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Investment grants and firms’ productivity: how effective is a grant booster shot?

Author

Listed:
  • Fernando Alexandre

    (NIPE/Universidade do Minho)

  • Miguel Chaves

    (NIPE/Universidade do Minho)

  • Miguel Portela

    (NIPE/Universidade do Minho
    IZA)

Abstract

This paper evaluates the impact of awarding a second investment grant to the same firm. We implement a Regression Discontinuity Design strategy using a rich firm-level administrative database, which allows us to link applications to grants and their scores to firms’ performance. Our results show that while a single grant has a positive impact on firms’ labour productivity, a second investment grant produces an even stronger effect. A more granular analysis suggests that only micro- and small-sized firms benefit from a single grant, whereas the overall effect of an investment grant booster shot is confirmed for the micro- and small-sized firms. No effects were found on total factor productivity for either the single or the second grant.

Suggested Citation

  • Fernando Alexandre & Miguel Chaves & Miguel Portela, 2025. "Investment grants and firms’ productivity: how effective is a grant booster shot?," Small Business Economics, Springer, vol. 64(4), pages 1601-1641, April.
    • Handle: RePEc:kap:sbusec:v:64:y:2025:i:4:d:10.1007_s11187-024-00955-7
    DOI: 10.1007/s11187-024-00955-7
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    More about this item

    Keywords

    Industrial policy; Investment grants; Multiple grants; Productivity;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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