Both academic scholars and policy makers are debating the effectiveness of incentive system that boost firms' competition enhancing innovation and research and development (R&D) efforts. In the last 10 years, the objectives of the Lisbon Strategy (the objective of increasing R&D expenditure to 3% of GDP) have accelerated the growth rate of public R&D support but the sign and the size of the effects on firms’ R&D expenditure and performances is an open question. Spurred by the increasing share of public resources devoted to supporting innovation activity, a growing body of literature has investigated the effectiveness of R&D subsidies. The findings are mixed and controversial. David et al. (2000) examine the results of forty years of empirical studies and find that there is no conclusive evidence in favour of public support. The inconclusive empirical results could mainly be explained by the difficulties in isolating the impact of innovation subsidies from the confounding effects induced by other factors. In particular, participation in these programs is generally endogenous and the selection bias is pervasive. Economists and econometricians deal with the problem of inferring the effect of a policy by using different evaluation methods, depending basically on the type and quality of available data and on the policy “assignment rule’’ (Blundell-Dias, 2009). Only recently an interesting literature on econometric evaluation methods for non-experimental data; also in the field of public support to private R&D has arisen. The paper is cast in this new stream of literature. The study analyzes the effect of public R&D subsidies on firms performance and innovative efforts in Italian industry using a counterfactual approach based on a non-experimental method. The main concern is to assess the effectiveness of public R&D support on firm’s performances analyzing whether the sign and the size of the effects depend on the size of the firms and on its technological level. We want evaluate 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. It is the first time that a counterfactual analysis considers also IIP. Both the instruments allocate subsidies on the basis of a technical selection among projects of competing firms. The study compare subsidized firms with non subsidized ones using a counterfactual approach based on a MDID (Matching Differences-in Differences) estimator. The empirical analysis is carried on a new detailed and informative database including companies awarded at least one R&D grant during the years 2000-2006; for each company we have data on the size of subsidies, from the administrative archive, and balance sheet data from balance sheet database. We estimate the impact of the subsidies on revenues, material and immaterial investment, value added, employment, labour productivity and profitability.

DE CASTRIS, M. (2012). ARE THE R&D SUBSIDIES EFFECTIVE? AN EMPIRICAL ANALYSIS FOR ITALY. In Istituzioni, Reti Territoriali e Sistema Paese:la governance delle relazioni locali nazionali.

ARE THE R&D SUBSIDIES EFFECTIVE? AN EMPIRICAL ANALYSIS FOR ITALY

DE CASTRIS, MARUSCA
2012-01-01

Abstract

Both academic scholars and policy makers are debating the effectiveness of incentive system that boost firms' competition enhancing innovation and research and development (R&D) efforts. In the last 10 years, the objectives of the Lisbon Strategy (the objective of increasing R&D expenditure to 3% of GDP) have accelerated the growth rate of public R&D support but the sign and the size of the effects on firms’ R&D expenditure and performances is an open question. Spurred by the increasing share of public resources devoted to supporting innovation activity, a growing body of literature has investigated the effectiveness of R&D subsidies. The findings are mixed and controversial. David et al. (2000) examine the results of forty years of empirical studies and find that there is no conclusive evidence in favour of public support. The inconclusive empirical results could mainly be explained by the difficulties in isolating the impact of innovation subsidies from the confounding effects induced by other factors. In particular, participation in these programs is generally endogenous and the selection bias is pervasive. Economists and econometricians deal with the problem of inferring the effect of a policy by using different evaluation methods, depending basically on the type and quality of available data and on the policy “assignment rule’’ (Blundell-Dias, 2009). Only recently an interesting literature on econometric evaluation methods for non-experimental data; also in the field of public support to private R&D has arisen. The paper is cast in this new stream of literature. The study analyzes the effect of public R&D subsidies on firms performance and innovative efforts in Italian industry using a counterfactual approach based on a non-experimental method. The main concern is to assess the effectiveness of public R&D support on firm’s performances analyzing whether the sign and the size of the effects depend on the size of the firms and on its technological level. We want evaluate 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. It is the first time that a counterfactual analysis considers also IIP. Both the instruments allocate subsidies on the basis of a technical selection among projects of competing firms. The study compare subsidized firms with non subsidized ones using a counterfactual approach based on a MDID (Matching Differences-in Differences) estimator. The empirical analysis is carried on a new detailed and informative database including companies awarded at least one R&D grant during the years 2000-2006; for each company we have data on the size of subsidies, from the administrative archive, and balance sheet data from balance sheet database. We estimate the impact of the subsidies on revenues, material and immaterial investment, value added, employment, labour productivity and profitability.
2012
DE CASTRIS, M. (2012). ARE THE R&D SUBSIDIES EFFECTIVE? AN EMPIRICAL ANALYSIS FOR ITALY. In Istituzioni, Reti Territoriali e Sistema Paese:la governance delle relazioni locali nazionali.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11590/188227
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