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Access to Business Subsidies: What Explains Complementarities and Persistency?

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  • Koski, Heli
  • Pajarinen, Mika

Abstract

Our empirical analysis using an extensive database on the allocation of busi-ness subsidies in Finland during the years 20042008 finds that large firms are less likely to exit support system and more likely to continue receiving both support from one organization only and simultaneous support from multiple organizations. Large firms propensity to transit between subsidies of different organizations is also higher than that of the smaller ones. Our study detects another interesting characteristic of the Finnish business subsidy system : the existence of agency-specific loyal customers. Firm size relates positively to the probability of a firm becoming the agency-specific customer of any public support provider, while the effect of other firm-level factors on this probability varies among the agencies. In addition to this, various parts of our analysis suggest that there is also a group of firms comprising more likely larger firms that tends to obtain support simultaneously from at least from two different organizations over several years. This finding is, as is the existence of agency-specific loyal customers, contrary to the basic principles of business subsidy system originally designed for providing temporary aid for companies.

Suggested Citation

  • Koski, Heli & Pajarinen, Mika, 2010. "Access to Business Subsidies: What Explains Complementarities and Persistency?," Discussion Papers 1226, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:dpaper:1226
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    File URL: http://www.etla.fi/wp-content/uploads/2012/09/dp1226.pdf
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    Cited by:

    1. Koski, Heli & Pajarinen, Mika, 2011. "Do Business Subsidies Facilitate Employment Growth?," Discussion Papers 1235, The Research Institute of the Finnish Economy.
    2. Heli Koski & Mika Pajarinen, 2013. "The role of business subsidies in job creation of start-ups, gazelles and incumbents," Small Business Economics, Springer, vol. 41(1), pages 195-214, June.

    More about this item

    Keywords

    public subsidies; complementarities; transitions; persistency;

    JEL classification:

    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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