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Promoting Innovation: The Differential Impact of R&D Subsidies

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Listed:
  • Reda Cherif
  • Fuad Hasanov
  • Christoph Grimpe
  • Wolfgang Sofka

Abstract

We investigate the effect of R&D subsidies on firms’ innovation by ownership, industry, and firm size using German firm-level data. The impact of R&D subsidies is heterogeneous across industries for multinational corporations (MNCs) and domestic firms while it does not differ substantially by firm size. Domestic firms have a larger response in R&D spending in low-tech manufacturing, knowledge-intensive services, and technological services while the response of domestic and foreign MNCs is broadly similar and is greater in medium-tech and high-tech manufacturing. Foreign MNC subsidiaries’ response in terms of patents is greater than that of domestic MNCs in most industries.

Suggested Citation

  • Reda Cherif & Fuad Hasanov & Christoph Grimpe & Wolfgang Sofka, 2022. "Promoting Innovation: The Differential Impact of R&D Subsidies," IMF Working Papers 2022/192, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2022/192
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    More about this item

    Keywords

    Innovation; patents; research and development; R&D; subsidies; multinationals; investment; technology policy; R&D subsidy; high-tech manufacturing; subsidiaries' response; low-tech manufacturing; R&D spending; Transnational corporations; Manufacturing; Services sector; Government subsidies; Investment policy; Global;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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