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An Empirical Evaluation of The Effects of R&D Subsidies

Isabel Busom ()

Economics of Innovation and New Technology, 2000, vol. 9, issue 2, 111-148

Abstract: R&D subsidies are a common tool of technology policy, but little is known about the effects they have on the behavior of firms. This paper presents evidence on the effects that R&D subsidies have on the R&D effort of recipients, and on the probability that a firm will participate in a program granting R&D subsidies. The empirical model consists of a system of equations: a participation equation; and an R&D effort equation. Endogeneity of public funding is controlled for. Estimates are obtained with a cross-section sample of Spanish firms. The main findings are that: 1) small firms are more likely to obtain a subsidy than large firms, probably reflecting one of the public agency's goals; 2) overall, public funding induces more private effort, but for some firms (30% of participants) full crowding out effects cannot be ruled out, and 3) firm size remains related to effort, whether or not a firm gets public funding.

Keywords: Technology policy; R&D; subsidies; policy evaluation (search for similar items in EconPapers)
Date: 2000
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DOI: 10.1080/10438590000000006

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