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

Author

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  • 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
    Note: The paper has been revised and the title has been changed
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    References listed on IDEAS

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    6. Almus, Matthias & Czarnitzki, Dirk, 2003. "The Effects of Public R&D Subsidies on Firms' Innovation Activities: The Case of Eastern Germany," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(2), pages 226-236, April.
    7. David, Paul A. & Hall, Bronwyn H. & Toole, Andrew A., 2000. "Is public R&D a complement or substitute for private R&D? A review of the econometric evidence," Research Policy, Elsevier, vol. 29(4-5), pages 497-529, April.
    8. DUGUET Emmanuel, 2004. "Are R&D subsidies a substitute or a complement to privately funded R&D? Evidence from France using propensity score methods for non- experimental data," Public Economics 0411007, University Library of Munich, Germany.
    9. Tor Jakob Klette & Jarle Møen, 1999. "From Growth Theory to Technology Policy - Coordination Problems in Theory and Practice," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 25, pages 53-74.
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    11. Lerner, Josh, 1999. "The Government as Venture Capitalist: The Long-Run Impact of the SBIR Program," The Journal of Business, University of Chicago Press, vol. 72(3), pages 285-318, July.
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    16. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
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    Cited by:

    1. Dongphil Chun & Yanghon Chung & Chungwon Woo & Hangyeol Seo & Hyesoo Ko, 2015. "Labor Union Effects on Innovation and Commercialization Productivity: An Integrated Propensity Score Matching and Two-Stage Data Envelopment Analysis," Sustainability, MDPI, Open Access Journal, vol. 7(5), pages 1-19, April.
    2. José Ángel Zúñiga-Vicente & César Alonso-Borrego & Francisco J. Forcadell & José I. Galán, 2014. "Assessing The Effect Of Public Subsidies On Firm R&D Investment: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 36-67, February.
    3. Pekka SALMI, 2012. "The Impact of Public R&D Funding on Open Innovation," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 15(1), pages 142-163, June.
    4. Sonja Radas & Ivan-Damir Anic, 2013. "Evaluating Additionality of an Innovation Subsidy Program Targeted at SMEs: An Exploratory Study," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 15(1), pages 61-88, April.
    5. Liu, Xiaolu & Li, Xiaoyu & Li, Honglin, 2016. "R&D subsidies and business R&D: Evidence from high-tech manufacturing firms in Jiangsu," China Economic Review, Elsevier, vol. 41(C), pages 1-22.
    6. Tommy Clausen, 2008. "Do subsidies have positive impacts on R&D and innovation activities at the firm level?," Working Papers on Innovation Studies 20070615, Centre for Technology, Innovation and Culture, University of Oslo.
    7. Castillo, Leopoldo Laborda & Guasch, Jose Luis, 2012. "Overdraft facility policy and firm performance : an empirical analysis in eastern European Union industrial firms," Policy Research Working Paper Series 6101, The World Bank.
    8. Simachev, Yuri & Kuzyk, Mikhail & Feygina, Vera, 2014. "Russian policies in support of innovation: elusive quest for efficiency," MPRA Paper 56750, University Library of Munich, Germany.
    9. repec:eee:rensus:v:76:y:2017:i:c:p:813-823 is not listed on IDEAS
    10. repec:nea:journl:y:2017i:34:p:59-93 is not listed on IDEAS
    11. repec:eee:enepol:v:108:y:2017:i:c:p:425-434 is not listed on IDEAS
    12. Wojciech Grabowski & Krzysztof Szczygielski & M. Teoman Pamukçu & Sinan Tandogan, 2013. "Does Government Support for Private Innovation Matter? Firm Level Evidence from Turkey and Poland," CASE Network E-briefs 3, CASE-Center for Social and Economic Research.
    13. Aerts, Kris & Schmidt, Tobias, 2006. "Two for the price of one? On additionality effects of R&D subsidies: A comparison between Flanders and Germany," ZEW Discussion Papers 06-063, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item

    Keywords

    R&D investment; crowding out; public funding; matching; subsidies;

    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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