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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.

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File URL: http://gemf.fe.uc.pt/workingpapers/pdf/2012/gemf_2012-18.pdf
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Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2012-18.

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Length: 41 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:gmf:wpaper:2012-18
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