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Instrument policy mix and firm size: is there complementarity between R&D subsidies and R&D tax credits?

Tea Petrin () and Dragana Radicic
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Tea Petrin: University of Ljubljana

The Journal of Technology Transfer, 2023, vol. 48, issue 1, No 6, 215 pages

Abstract: Abstract Nowadays, a rising number of evaluations investigates a multifaceted concept of the policy mix. Our study specifically focuses on the mix of two most frequently used supply-side instruments–R&D subsidies and R&D tax credits. Drawing on the longitudinal sample of Spanish manufacturing firms, we investigate whether there is a complementary interaction between these policy instruments with respect to product and process innovations. Moreover, by employing a dynamic random-effects probit estimator, we account for the persistence of innovation and endogeneity of public support. The results, that are separately estimated for SMEs and large firms, uniformly show evidence of no interplay between two policy instruments either in SMEs or large firms. However, among factors that influence the propensity to product and process innovations, by far, the largest effect is generated by true state dependence. These findings provide some policy implications for fostering product and process innovations in the long run.

Keywords: Instrument policy mix; R&D subsidies; R&D tax credits; Persistence of innovation; SMEs; Spanish manufacturing (search for similar items in EconPapers)
JEL-codes: O32 O38 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10961-021-09908-8

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