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Bang for the Buck: Aggregate Impact of Firm-Level R&D Incentives

Author

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  • Ignaszak, Marek
  • Robbins, Daniel
  • SedlÃ¡Ä ek, Petr

Abstract

How do R&D incentives affect individual firms and, in turn, shape aggregate growth? We develop a novel empirical framework, grounded in endogenous growth theory, allowing us to measure firms’ responsiveness to R&D incentives and to aggregate such responses. After validating the predictions of our framework using three different micro-datasets, we apply it to Compustat data. We find that (i) ignoring firm heterogeneity severely under-states the aggregate effectiveness of R&D incentives, (ii) per dollar spent on R&D incentives, young (rather than small) firms raise aggregate growth the most and (iii) our results are robust to knowledge spillovers, dynamics and borrowing constraints.

Suggested Citation

  • Ignaszak, Marek & Robbins, Daniel & SedlÃ¡Ä ek, Petr, 2025. "Bang for the Buck: Aggregate Impact of Firm-Level R&D Incentives," CEPR Discussion Papers 20653, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20653
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    File URL: https://cepr.org/publications/DP20653
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    Keywords

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    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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