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Effectiveness of Public R&D Subsidies in East Germany – Is it a Matter of Firm Size?

  • Janina Reinkowski

    ()

  • Björn Alecke
  • Timo Mitze
  • Gerhard Untiedt

This paper analyses the impact of public subsidies on private sector research and development (R&D) activity for East German firms. Using propensity score matching, our empirical results indicate that subsidized firms indeed show a higher level of R&D intensity and a higher probability for patent application compared to non-subsidized firms for our sample year 2003. On average we find an increase in the R&D intensity of about 3.7 percentage points relative to non-subsidized firms. The probability for patent applications rises by 21 percentage points. These results closely match earlier empirical results for East Germany. Given the fact that the East German innovation system is particularly driven by small and medium sized enterprises (SME), we put a special focus on the effectiveness of the R&D subsidies for this latter subgroup. Here no previous empirical evidence is available so far. Our findings indicate that policy effectiveness also holds for private R&D activity of SMEs, where the highest increase in terms of R&D intensity is estimated for micro businesses with up to 10 employees.

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File URL: http://repec.rwi-essen.de/files/REP_10_204.pdf
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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0204.

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Length: 27 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:rwi:repape:0204
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  1. José García-Quevedo, 2004. "Do Public Subsidies Complement Business R&D? A Meta-Analysis of the Econometric Evidence," Kyklos, Wiley Blackwell, vol. 57(1), pages 87-102, 02.
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