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Evaluating the Effect of Public Subsidies on firm R&D activity: an Application to Italy Using the Community Innovation Survey

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Abstract

The aim of the paper is twofold: to verify a full policy failure of public support on private R&D effort, when in presence of a potential plurality of public incentives; to compare the most recent econometric methods used for the analysis of the input additionality. Compared to previous studies our work wants to trace out an advance in two directions: adding more robustness by comparing results from various econometric techniques and providing an analysis of the R&D policy effect behind the average results. A by-product of the paper is a taxonomy of the econometric methods used in the literature, according to the structure of the models, the type of dataset and the available policy information. We exploit the third wave of the Community Innovation Survey for Italy (1998-2000) with a sample size of 1,221 supported and 1,319 non-supported firms. Given the used type of data, the article presents two main limits: first, we do not know the level of the subsidy, so that we can control only for the presence of a total crowding-out; second, we can check only the short-run effect of the supporting policy, while an increase in the private R&D effort could be more likely in the medium term. Our results suggest that: 1. the main factors influencing the probability to participate to the incentive policy are R&D experience, human skills, liquidity constraints, but also foreign capital ownership; 2. on average, the total substitution of private funding by the public one is excluded for Italy as a whole, although some cases of total crowding-out are found: low knowledge intensive services, very small firms (10-19 employees) and the auto-vehicle industry. We get, on average, 885 additional thousand Euros of R&D expenditure per firm with a ratio equal to 4.62: it means that if a generic control unit does 1 thousand Euros of R&D expenditure a matched treated does 4.62 thousand Euros. The additionality for the R&D intensity is about 0.014 with a ratio of about 2.67.

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  • Giovanni Cerulli & Bianca Poti', 2008. "Evaluating the Effect of Public Subsidies on firm R&D activity: an Application to Italy Using the Community Innovation Survey," CERIS Working Paper 200809, Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY -NOW- Research Institute on Sustainable Economic Growth - Moncalieri (TO) ITALY.
    • Handle: RePEc:csc:cerisp:200809
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    Cited by:

    1. Marusca De Castris & Guido Pellegrini, 2015. "Caratteristiche delle imprese ed eterogeneità degli effetti degli incentivi alla r&s," SCIENZE REGIONALI, FrancoAngeli Editore, vol. 2015(3 Suppl.), pages 61-79.
    2. Giovanni Cerulli & Bianca Potì, 2012. "The differential impact of privately and publicly funded R&D on R&D investment and innovation: the Italian case," Prometheus, Taylor & Francis Journals, vol. 30(1), pages 113-149, March.
    3. Syoum Negassi & Jean-Francois Sattin, 2014. "Evaluation of Public R&D Policy: A Meta-Regression Analysis," Working Papers 14-09, University of Delaware, Department of Economics.
    4. Spyros Arvanitis, 2013. "Micro-econometric approaches to the evaluation of technology-oriented public programmes: a non-technical review of the state of the art," Chapters,in: Handbook on the Theory and Practice of Program Evaluation, chapter 3, pages 56-88 Edward Elgar Publishing.
    5. Wojciech Grabowski & Krzysztof Szczygielski & M. Teoman Pamukçu & Sinan Tandogan, 2013. "Does Government Support for Private Innovation Matter? Firm Level Evidence from Turkey and Poland," CASE Network E-briefs 3, CASE-Center for Social and Economic Research.
    6. repec:prg:jnlpep:v:2013:y:2013:i:4:id:436:p:487-503 is not listed on IDEAS
    7. Gustafsson, Anders & Gustavsson Tingvall, Patrik & Halvarsson, Daniel, 2017. "Subsidy Entrepreneurs," Ratio Working Papers 303, The Ratio Institute.
    8. Brüggemann, Julia & Proeger, Till, 2017. "The effectiveness of public subsidies for private innovations: An experimental approach," Center for European, Governance and Economic Development Research Discussion Papers 266, University of Goettingen, Department of Economics.
    9. Alena Zemplinerová & Eva Hromádková, 2012. "Determinants of Firm´s Innovation," Prague Economic Papers, University of Economics, Prague, vol. 2012(4), pages 487-503.
    10. Correa, Paulo & Andres, Luis & Borja-Vega, Christian, 2013. "The impact of government support on firm R&D investments : a meta-analysis," Policy Research Working Paper Series 6532, The World Bank.

    More about this item

    Keywords

    Business R&D; Public Incentives; Econometric Evaluation;

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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