Promoting Innovation: The Differential Impact of R&D Subsidies

Reda Cherif (), Christoph Grimpe (), Fuad Hasanov and Wolfgang Sofka ()
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Reda Cherif: University of Cambridge
Christoph Grimpe: Copenhagen Business School and ZEW Leibniz Centre for European Economic Research
Wolfgang Sofka: Copenhagen Business School and University of Liverpool Management School

Journal of Industry, Competition and Trade, 2023, vol. 23, issue 3, No 4, 187-241

Abstract: Abstract We investigate the effect of R&D subsidies on firms’ innovation by ownership, industry, and firm size using German firm-level data. The impact of R&D subsidies is heterogeneous across industries for multinational corporations (MNCs) and domestic firms. This heterogeneity is robust using various estimators. Domestic firms have a larger response in R&D spending in low-tech and medium-term manufacturing, while the effect in high-tech manufacturing is larger for both domestic and foreign MNCs. In knowledge-intensive services and technological services, the response of domestic firms and in some cases foreign MNCs, is greater than that of domestic MNCs. In terms of patents, foreign MNC subsidiaries tend to have a larger count in high-tech manufacturing.

Keywords: Innovation; Patents; Research and development; R&D; Subsidies; Multinationals; Investment; Technology policy (search for similar items in EconPapers)
JEL-codes: H25 H32 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10842-023-00400-7

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