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The impact of R&D subsidies on firm innovation

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  • Raffaello Bronzini

    (Bank of Italy)

  • Paolo Piselli

    (Bank of Italy)

Abstract

This paper evaluates the impact of an R&D subsidy program implemented in a region of northern Italy on innovation by beneficiary firms. In order to verify whether the subsidies enabled firms to increase patenting activity, we exploit the mechanism used to allot the funds. Since only projects that scored above a certain threshold received the subsidy, we use a sharp regression discontinuity design to compare the number of patent applications, and the probability of submitting one, of subsidized firms with those of unsubsidized firms close to the cut-off. We find that the program had a significant impact on the number of patents, more markedly in the case of smaller firms. Our results show that the program was also successful in increasing the probability of applying for a patent, but only in the case of smaller firms.

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  • Raffaello Bronzini & Paolo Piselli, 2014. "The impact of R&D subsidies on firm innovation," Temi di discussione (Economic working papers) 960, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_960_14
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    Keywords

    research and development; investment incentives; regression discontinuity design; patents;
    All these keywords.

    JEL classification:

    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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