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R&D grants and R&D tax credits in Belgium: evidence on the policy mix

Author

Listed:
  • Pierluigi Angelino
  • Dirk Czarnitzki
  • Birgitte Hovdan

Abstract

Drawing on a longitudinal database of Belgian firms over the years 2014-2020, this study investigates the joint effect of R&D grants and R&D tax credits on R&D inputs and innovation outputs. We estimate Conditional Difference-in-Difference (CDiD) models and apply both treatment effects estimators that account for heterogeneous, staggered treatments as well as standard two-way fixed effects DiD estimators. We find positive treatment effects for both grants and tax credits on R&D employment, R&D employment intensity, and total R&D expenditures. R&D tax credits have a significant positive impact on the share of sales of new or improved products. By comparing the results obtained by the two econometric methods, we also find that the standard two-way fixed effects models may lead partially to potentially wrong conclusions about the impacts of such policies, as the traditional estimators may not sufficiently account for the complexity of how the policy instrument affect firm-level outcomes.

Suggested Citation

  • Pierluigi Angelino & Dirk Czarnitzki & Birgitte Hovdan, 2024. "R&D grants and R&D tax credits in Belgium: evidence on the policy mix," Working Papers of Department of Management, Strategy and Innovation, Leuven 752914, KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven.
    • Handle: RePEc:ete:msiper:752914
    Note: paper number MSI_2410
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    References listed on IDEAS

    as
    1. Charles Bérubé & Pierre Mohnen, 2009. "Are firms that receive R&D subsidies more innovative?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(1), pages 206-225, February.
    2. Marino, Marianna & Lhuillery, Stephane & Parrotta, Pierpaolo & Sala, Davide, 2016. "Additionality or crowding-out? An overall evaluation of public R&D subsidy on private R&D expenditure," Research Policy, Elsevier, vol. 45(9), pages 1715-1730.
    3. Guerzoni, Marco & Raiteri, Emilio, 2015. "Demand-side vs. supply-side technology policies: Hidden treatment and new empirical evidence on the policy mix," Research Policy, Elsevier, vol. 44(3), pages 726-747.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Policy mix; innovation; R&D grants; R&D tax credits; difference-in-difference;
    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
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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