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Research and development subsidies

Hanna Hottenrott

Chapter 52 in Elgar Encyclopedia on the Economics of Knowledge and Innovation, 2022, pp 420-424 from Edward Elgar Publishing

Abstract: Subsidies for research and development (R&D) are an important innovation policy tool. The economic rationale behind R&D subsidies is that private sector R&D is lower than socially desirable due to positive externalities and financing constraints. R&D subsidies are often designed as direct, project-based grants. Companies apply for them at public funding bodies who administered applications and make funding decisions on a case-by-case basis. An alternative way of granting R&D subsidies is through tax credits. Research shows that both forms of R&D subsidies can trigger additional R&D, but the evidence also suggests that the extent to which R&D subsidies initiate and expand R&D in recipient firms depends on the characteristics of the firm and the type of project that is subsidized.

Keywords: Business and Management; Economics and Finance; Innovations and Technology (search for similar items in EconPapers)
Date: 2022
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