Financing Innovation: Evidence from R&D Grants
Sabrina T. Howell
American Economic Review, 2017, vol. 107, issue 4, 1136-64
Governments regularly subsidize new ventures to spur innovation. This paper conducts the first large-sample, quasi-experimental evaluation of R&D subsidies. I use data on ranked applicants to the US Department of Energy's SBIR grant program. An early-stage award approximately doubles the probability that a firm receives subsequent venture capital and has large, positive impacts on patenting and revenue. These effects are stronger for more financially constrained firms. Certification, where the award contains information about firm quality, likely does not explain the grant effect. Instead, the grants are useful because they fund technology prototyping.
JEL-codes: D22 G24 G32 L53 O31 O34 O38 (search for similar items in EconPapers)
Note: DOI: 10.1257/aer.20150808
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