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Impact evaluation of business development grants on SME performance

Stjepan Srhoj, Michal Lapinski () and Janette Walde
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Michal Lapinski: Johannes Kepler University Linz

Small Business Economics, 2021, vol. 57, issue 3, No 10, 1285-1301

Abstract: Abstract An assessment of the economic impact that can be achieved through grants makes it possible to refine such policy instruments in order to make public funding more effective in relation to the objectives pursued. In this paper, we investigate the effects of a business development grant scheme. More specifically, we question whether firms’ performance measures increased after receiving such grants. Methodically, we match grant receiving firms with grant non-receivers and estimate the average treatment effect on the treated using a two-way fixed effects regression. Our results point towards a positive effect of the grant scheme, which is particularly evident for firms of smaller size. Our estimated dose-response functions show that the share of grant amount in firm profits needs to be high enough for the grants to be effective. According to back-of-the envelope analysis, benefits outweigh the direct scheme costs.

Keywords: Business development grants; Policy evaluation; Two-way fixed effects regression; Matching; Heterogeneous treatment effects; Dose-response-function (search for similar items in EconPapers)
JEL-codes: C21 G01 H23 H50 L26 O38 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11187-020-00348-6

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