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Financial Constraints: Do They Matter to R&D Subsidy Attribution?


  • Filipe Silva

    () (GEMF, University of Coimbra, Portugal)

  • Carlos Carreira

    () (Faculty of Economics/GEMF, University of Coimbra, Portugal)


Even though innovation subsidies and financial constraints are two closely related lines of research, the link between them is rather unexplored. This paper is, to our knowledge, the first to explicitly analyse both the allocation of innovation subsidies and their role in alleviating firms’ financial constraints. It is not the purpose of the paper to question whether subsidies foster innovation, but rather if: a) subsidies are being correctly allocated to financially constrained firms; b) they effectively reduce financial constraints. We argue that, in addition to the usual “public good” arguments behind the allocation of innovation subsidies, the extent to which firms are able to obtain external funding should not be overlooked. Overall, our results question the allocation and effectiveness of subsidies in alleviating financial constraints of firms willing to innovate. Accordingly, these findings have serious implications on the design of future innovation policy actions.

Suggested Citation

  • Filipe Silva & Carlos Carreira, 2012. "Financial Constraints: Do They Matter to R&D Subsidy Attribution?," GEMF Working Papers 2012-18, GEMF, Faculty of Economics, University of Coimbra.
  • Handle: RePEc:gmf:wpaper:2012-18

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    References listed on IDEAS

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    More about this item


    R&D Subsidies; Innovation; Financial constraints; Firm-level analysis; Portugal.;

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General


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