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Bidding against the odds? The impact evaluation of grants for young micro and small firms during the recession

Stjepan Srhoj, Bruno Skrinjaric () and Sonja Radas ()
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Bruno Skrinjaric: The Institute of Economics, Zagreb
Sonja Radas: The Institute of Economics, Zagreb

No 1802, Working Papers from The Institute of Economics, Zagreb

Abstract: Impact evaluations of entrepreneurship policies targeting young firms have been somewhat neglected thus far in the literature. This paper seeks to contribute to this topic in the context of a long recession period, such as the one experienced in Croatia from 2009 to 2014. These policies awarded small grant amounts for activities such as business plan development, consultancy, marketing and office renovation. Awarding small grant amounts to many firms might be tempting for politicians, but is this political populism or smart policy? This paper estimates the impact of matching grants for business development on three types of outcomes: bank loans, firm survival and firm performance. The full firm-level census dataset was supplemented with entrepreneur-level court register and firm-level data on grant recipients. Policy evaluation was performed using matching techniques with a combination of nearest neighbor and exact matching, and robustness of results was tested using a placebo test and Rosenbaum bounds. The results show that grants had a positive impact on firm survival after the recession, and on obtaining long-term bank loans during the recession. However, no empirical support was found for the grants’ impact on growth in turnover, employment and labor productivity.

Keywords: grants; recession; young firms; survival; firm performance; bank loans (search for similar items in EconPapers)
JEL-codes: H25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-eff, nep-ent, nep-ino, nep-sbm and nep-tid
Date: 2018-05
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