Firm characteristics and the impact of R&D subsidies

Literature on the evaluation of public R&D subsidies show controversial results respect to additionality effects of R&D subsidies (David et al.,2000). The uncertain empirical results can be attributed to some factors that act as confounding variables in the evaluation of innovation subsidies. One potential cause is that project and firms selection rules may be quite heterogeneous leading to different outcomes. Several evaluation methods tackle this problem in different ways depending basically on the type and quality of available data and on the policy “assignment rule’’ (Blundell-Dias, 2009). The aim of this study is to measure the influence of different firm characteristics on the impact of the policy instruments. We select two policy instruments: the Fund for Technological Innovation (FTI), that is the specific policy instrument used to subsidize private projects on R&D, and the IIP (Innovation Integrated Programmes), financing both private capital and innovation investment. Both the instruments allocate subsidies on the basis of a technical selection among projects of competing firms. Moreover we consider structural and economic features of firms and different forms of innovation activities. Data on firm characteristics are collected by a CATI survey on subsidized and not subsidized firms. The estimation is carried out on a data set of firms, that includes also the subsidy status, the size of subsidies, from the administrative archive, and balance sheet data. We empirically test whether and how much firm characteristics can modify the sign and the level of the effects of public policy using counterfactual approach. Moreover we examine the marginal effects of different characteristics on the probability to be subsidized. Results indicate that firm characteristics significantly affect the additionality of R&D subsidies.