Do regional R&D subsidies foster innovative SMEs’ development: evidence from Aquitaine SMEs

Many studies have looked at the effectiveness of public schemes supporting private R&D but few have highlighted the role regions play in R&D funding. The present article investigates the effectiveness of R&D support at this level of analysis. More precisely, it assesses the R&D support scheme developed in Aquitaine, France's number one region in terms of proportion of budget spent on innovation. Its findings show that (i) public subsidies (regional and non-regional subsidies) have induced local SMEs to increase their R&D resources; (ii) effectiveness of public R&D support relies on the joint interventions of regional, national and supranational authorities; (iii) higher private R&D tends to be explained by an increase in the number of R&D employees, rather than an increase in their remuneration; (iv) regional action has a beneficial effect on business growth, and (v) job creation targets of the regional science and technology policy are satisfied, suggesting that regional subsidies are particularly effective when they help the region's innovative SMEs to expand and develop. More broadly, the article enhances understanding of the determinants explaining the effectiveness of public actions supporting private R&D.