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The effect of subsidies on R&D investment and success: do subsidy history and size matter?

  • Aschhoff, Birgit

This study provides insights into the effects of public R&D grants on R&D input and output of firms from Germany. Previous research has shown that the allocation of R&D project grants is rather stable regarding the pool of beneficiaries. The question is whether this participation pattern can be justified by its realized effects. In addition, the impact of the grant size on the effects is investigated. Therefore, I allow to a certain extent for heterogeneous treatment effects in these two dimensions. Using a sample of about 8,500 observations, a non-parametric matching approach with multiple treatments is applied to estimate the effects of public R&D grants on firm's R&D input. The results show that particularly frequently given grants as well as medium and large grants are suitable to increase the scope of firm-financed R&D plans. For the analysis of the effects on firm's R&D output the R&D expenditures are disentangled in R&D which would have been spent in the absence of the grant and publicly induced R&D, including the grant and the effect on private R&D expenditures. Basically both types of R&D are equally productive in terms of innovative output. For the statement that a rather stable pattern of program participation leads to a lower effectiveness of the instrument no evidence has been found.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 09-032.

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Date of creation: 2009
Date of revision:
Handle: RePEc:zbw:zewdip:09032
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  1. Michael Lechner, 2002. "Program Heterogeneity And Propensity Score Matching: An Application To The Evaluation Of Active Labor Market Policies," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 205-220, May.
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  3. Birgit Aschhoff, 2010. "Who Gets the Money? The Dynamics of R&D Project Subsidies in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 230(5), pages 522-546, October.
  4. Katrin Hussinger, 2008. "R&D and subsidies at the firm level: an application of parametric and semiparametric two-step selection models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(6), pages 729-747.
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  7. DUGUET Emmanuel, 2004. "Are R&D subsidies a substitute or a complement to privately funded R&D? Evidence from France using propensity score methods for non- experimental data," Public Economics 0411007, EconWPA.
  8. 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.
  9. Hyytinen, Ari & Toivanen, Otto, 2003. "Do Financial Constraints Hold Back Innovation and Growth? Evidence on the Role of Public Policy," Discussion Papers 820, The Research Institute of the Finnish Economy.
  10. 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.
  11. Almus, Matthias & Czarnitzki, Dirk, 2003. "The Effects of Public R&D Subsidies on Firms' Innovation Activities: The Case of Eastern Germany," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(2), pages 226-36, April.
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  17. Aerts, Kris & Czarnitzki, Dirk, 2004. "Using Innovation Survey Data to Evaluate R&D Policy: The Case of Belgium," ZEW Discussion Papers 04-55, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  18. Dirk Czarnitzki & Bernd Ebersberger & Andreas Fier, 2007. "The relationship between R&D collaboration, subsidies and R&D performance: Empirical evidence from Finland and Germany," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1347-1366.
  19. Joshua D. Angrist, 1995. "Estimating the Labor Market Impact of Voluntary Military Service Using Social Security Data on Military Applicants," NBER Working Papers 5192, National Bureau of Economic Research, Inc.
  20. Aschhoff, Birgit & Doherr, Thorsten & Köhler, Christian & Peters, Bettina & Rammer, Christian & Schubert, Torben & Schwiebacher, Franz, 2008. "Innovation in Germany: Results of the German Innovation Survey 2007," The Annual German Innovation Survey, Key Figures Reports 113891, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  21. 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.
  22. Austan Goolsbee, 1998. "Does Government R&D Policy Mainly Benefit Scientists and Engineers?," NBER Working Papers 6532, National Bureau of Economic Research, Inc.
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  24. Michael Gerfin & Michael Lechner, 2002. "A Microeconometric Evaluation of the Active Labour Market Policy in Switzerland," Economic Journal, Royal Economic Society, vol. 112(482), pages 854-893, October.
  25. Michael Lechner, 2000. "An Evaluation of Public-Sector-Sponsored Continuous Vocational Training Programs in East Germany," Journal of Human Resources, University of Wisconsin Press, vol. 35(2), pages 347-375.
  26. Czarnitzki, Dirk & Fier, Andreas, 2002. "Do Innovation Subsidies Crowd Out Private Investment? Evidence from the German Service Sector," ZEW Discussion Papers 02-04, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  27. Barbara Sianesi, 2004. "An Evaluation of the Swedish System of Active Labor Market Programs in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 133-155, February.
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  30. 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.
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