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The possible adverse impact of innovation subsidies: some evidence from Italy

Alessandra Catozzella and Marco Vivarelli ()

International Entrepreneurship and Management Journal, 2016, vol. 12, issue 2, No 2, 368 pages

Abstract: Abstract The impact of public funding on innovative productivity is estimated using a sample of Italian firm-level data (CIS3). A bivariate endogenous switching model is developed in order to free the analysis of the sources of sample selection and firm heterogeneity, the possible simultaneity between subsidy allocation and the qualitative composition of the innovative output, as well as the endogeneity of public support with respect to innovative performance. Results show that innovative productivity is negatively affected by the subsidy; as a result of government intervention, supported firms appear to exhaust their advantage through merely increasing their innovative expenditures.

Keywords: Innovation subsidy; Policy evaluation; Product innovation; Bivariate endogenous switching model (search for similar items in EconPapers)
JEL-codes: O31 O38 (search for similar items in EconPapers)
Date: 2016
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