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The Impact of Public Funding on Private R&D investment: New Evidence from a Firm Level Innovation Study

Author

Listed:
  • Lööf, Hans

    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

  • Heshmati, Almas

    (heshmati@snu.ac.kr)

Abstract

This paper investigates the effectiveness of a public innovation policy aimed at stimulating private R&D investment. The research will examine whether public funding increases the total spending on research or merely displaces funding from private sources. The empirical analysis is based on the Community Innovation Survey data merged with register data. It is an evaluation of whether firms receiving public funds have on average a higher R&D intensity compared to those not receiving any such support. In order to account for possible selectivity bias, and to improve comparability of firms, two different versions of a semi-parametric matching approach are employed. The two matching estimators result in somewhat different results. The Nearest Neighbour estimator is preferred to the Kernel estimator. The results support the hypothesis suggesting that there are additive effects of public R&D financing on private research expenditures only for small firms

Suggested Citation

  • Lööf, Hans & Heshmati, Almas, 2004. "The Impact of Public Funding on Private R&D investment: New Evidence from a Firm Level Innovation Study," Working Paper Series in Economics and Institutions of Innovation 6, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies, revised 01 Mar 2005.
    • Handle: RePEc:hhs:cesisp:0006
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    More about this item

    Keywords

    R&D investment; crowding out; public funding; matching; subsidies;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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