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An Empirical Evaluation of The Effects of R&D Subsidies

  • Isabel Busom

R&D subsidies are a common tool of technology policy, but little is known about the effects they have on the behavior of firms. This paper presents evidence on the effects that R&D subsidies have on the R&D effort of recipients, and on the probability that a firm will participate in a program granting R&D subsidies. The empirical model consists of a system of equations: a participation equation; and an R&D effort equation. Endogeneity of public funding is controlled for. Estimates are obtained with a cross-section sample of Spanish firms. The main findings are that: 1) small firms are more likely to obtain a subsidy than large firms, probably reflecting one of the public agency's goals; 2) overall, public funding induces more private effort, but for some firms (30% of participants) full crowding out effects cannot be ruled out, and 3) firm size remains related to effort, whether or not a firm gets public funding.

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Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 9 (2000)
Issue (Month): 2 ()
Pages: 111-148

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Handle: RePEc:taf:ecinnt:v:9:y:2000:i:2:p:111-148
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