Do Subsidies to Commercial R&D Reduce Market Failures? Microeconomic Evaluation Studies

Tor Jakob Klette, Jarle Møen () and Zvi Griliches

No 6947, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A number of market failures have been associated with R&D investments and significant amounts of public money have been spent on programs to stimulate innovative activities. In this paper, we review some recent microeconomic studies evaluating effects of government sponsored commercial R&D. We pay particular attention to the conceptual problems involved. Neither the firms receiving support, nor those not applying, constitute random samples. Furthermore, those not receiving support may be affected by the programs due to spillover effects which often are a main justification for R&D subsidies. Constructing a valid control group under these circumstances is challenging, and we relate our discussion to recent advances in econometric methods for evaluation studies based on non-experimental data. We also discuss some analytical questions that need to be addressed in order to assess whether R&D support schemes can be justified. For instance, what are the implication of firms' R&D investments being complementary to each other, and to what extent are potential R&D spillovers internalized in the market?

JEL-codes: G30 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pub and nep-tid
Date: 1999-02
Note: PR
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