Beyond Additionality: Are Innovation Subsidies Counterproductive?
Building on a standard policy evaluation literature mainly aimed at estimating the additional effect of subsidies on either firms' innovative expenditures or innovative outputs only, this paper tries to move one step further, combining the two (input and output) dimensions of innovation into a unique efficiency perspective. To this aim, the impact of public funding on the ratio between innovative sales and innovative expenditures (innovative productivity) is estimated using a sample of firm-level data drawn from the third Italian Community Innovation Survey (CIS). A bivariate endogenous switching model has been developed in order to free the analysis of any ex ante sources of sample selection and firm heterogeneity, at the same time getting rid of the two sources of endogeneity potentially affecting the results, i.e. the possible simultaneity between subsidy allocation and the qualitative composition of the innovative output, as well as the endogeneity of public support with respect to innovative performance. Results show that innovative productivity is negatively affected by the innovation subsidy; far from 'doing better' as a result of government intervention, supported firms appear to exhaust their advantage through merely increasing their innovative expenditures.
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References listed on IDEAS
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- Charles Bérubé & Pierre Mohnen, 2009.
"Are firms that receive R&D subsidies more innovative?,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 42(1), pages 206-225, February.
- Charles Bérubé & Pierre Mohnen, 2007. "Are Firms That Received R&D Subsidies More Innovative?," CIRANO Working Papers 2007s-13, CIRANO.
- Mohnen, Pierre & Bérubé, Charles, 2007. "Are Firms That Received R&D Subsidies More Innovative?," MERIT Working Papers 015, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Richard Blundell & Monica Costa Dias, 2000. "Evaluation methods for non-experimental data," Fiscal Studies, Institute for Fiscal Studies, vol. 21(4), pages 427-468, January. Full references (including those not matched with items on IDEAS)
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