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ARE SUBSIDIES TO BUSINESS R&D EFFECTIVE? REGRESSION
DISCONTINUITY EVIDENCE FROM THE TA CR ALFA PROGRAMME IDEA 2023
Results
In this section, we present the results of the RD estimates of the additionality effects of the programme. The results are presented separately both for SMEs and large firms, and for the period during (d) and after the subsidy (d+3), or by individual years relative to the period before the subsidy (t), which allows us to analyse the longitudinal structure of the estimated effects.14 First, we show the results for innovation input additionality in terms of R&D expenditures, and then we examine results for innovation output addi- tionality in terms of patenting and estimated impacts on economic performance.
Innovation input additionality
Table 2 shows the results for R&D expenditures. The main outcome is that the subsidies significantly stimulated R&D expenditures in SMEs, and that this positive effect is not limited to the period in which the subsidy was received, but in fact seems to accelerate in the period after the subsidy expired, which signals both strong and persistent crowding- in effects. In contrast, there is no evidence that the subsidies stimulated R&D expenditures in large firms either during the project or afterwards, as the coefficient proves to be actually negative, albeit it is imprecisely estimated.
A more detailed look by the source of R&D funding shows that, for SMEs, the crowding- in effect is strongly positive and increasing in time, not only for R&D funded from public sources, especially national funds that include support from the ALFA programme itself, but are actually even more positive and increasing in time for privately funded R&D. Hence, the subsidies seem to stimulate SMEs to devote more resources to R&D, either from their own pockets, or they enable the firms to acquire private funding from elsewhere that they would not otherwise have acquired. In large firms, though, the subsidies only seem to increase public R&D funding at the expense of the private funding for the duration of a project. There is even some support for crowding out of private sources. The results are largely inconclusive after the project expires.
14 For the projects that were funded, the project duration is given by the years in which the projects received funding from the ALFA programme. For projects that did not receive a grant, we set the duration to 4 years, which is the duration of a majority of funded projects.
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