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Value for money? New microeconomic evidence on public R&D grants in Flanders

  • LOPES BENTO Cindy
  • CZARNITZKI Dirk

A significant amount of money is spent on programs to stimulate innovative activities. In this paper, we review the effects of a specific government-sponsored commercial R&D program from various angles. We start by evaluating whether we find positive effects of subsidies on R&D investment and R&D employment. Then, we analyze how the observed effects of subsidies on R&D intensity and employment vary over time, vary if the firm receives also support from other sources, vary depending on how many supported projects a single firm has at the same time or vary if a firm gets support consecutively. Finally, we estimate the macroeconomic impact of these grants in terms of R&D employment. We conclude that (i) the policies are not subject to full crowding out, (ii) the treatments effects are stable over time, (iii) receiving subsidies from other sources in addition to the program under evaluation does not decrease the estimated treatment effect, and (iv) receiving grants repeatedly does not decrease the magnitude of the treatment effects either. Using a back-of-the envelope calculation, we estimate that, on average, five R&D jobs are created (or maintained) per supported project in the Flemish economy.

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Paper provided by CEPS/INSTEAD in its series CEPS/INSTEAD Working Paper Series with number 2012-19.

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Length: 48 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:irs:cepswp:2012-19
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  1. 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 06-63, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  7. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
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  9. Czarnitzki, Dirk & Lopes Bento, Cindy, 2011. "Innovation subsidies: Does the funding source matter for innovation intensity and performance? Empirical evidence from Germany," ZEW Discussion Papers 11-053, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. Dirk Czarnitzki & Hanna Hottenrott, 2011. "Financial Constraints: Routine Versus Cutting Edge R&D Investment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 121-157, 03.
  11. Bronwyn H. Hall & Alessandro Maffioli, 2008. "Evaluating the Impact of Technology Development Funds in Emerging Economies: Evidence from Latin America," NBER Working Papers 13835, National Bureau of Economic Research, Inc.
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  14. Czarnitzki, Dirk & Toole, Andrew A., 2006. "Patent protection, market uncertainty, and R&D investment," ZEW Discussion Papers 06-56, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  15. Czarnitzki, Dirk & Hussinger, Katrin, 2004. "The Link Between R&D Subsidies, R&D Spending and Technological Performance," ZEW Discussion Papers 04-56, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  16. Richard R. Nelson, 1959. "The Simple Economics of Basic Scientific Research," Journal of Political Economy, University of Chicago Press, vol. 67, pages 297.
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  20. Dirk Czarnitzki & Andrew Toole, 2007. "Business R&D and the Interplay of R&D Subsidies and Product Market Uncertainty," Review of Industrial Organization, Springer, vol. 31(3), pages 169-181, November.
  21. Czarnitzki, Dirk & Hottenrott, Hanna & Thorwarth, Susanne, 2009. "Industrial research versus development investment: the implications of financial constraints," ZEW Discussion Papers 09-049, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  22. Isabel Busom, 2000. "An Empirical Evaluation of The Effects of R&D Subsidies," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 9(2), pages 111-148.
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  24. Giovanni Cerulli, 2010. "Modelling and Measuring the Effect of Public Subsidies on Business R&D: A Critical Review of the Econometric Literature," The Economic Record, The Economic Society of Australia, vol. 86(274), pages 421-449, 09.
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  27. Garcia, Abraham & Mohnen, Pierre, 2010. "Impact of government support on R&D and innovation," MERIT Working Papers 034, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
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