Page 26 - IDEA Studie 07 2023 TACR

ARE SUBSIDIES TO BUSINESS R&D EFFECTIVE? REGRESSION
DISCONTINUITY EVIDENCE FROM THE TA CR ALFA PROGRAMME IDEA 2023
As far as the type of R&D costs is concerned, the results indicate another major difference by the size categories of firms. While in SMEs, the subsidies stimulate current R&D expenditures, such as personnel, material, and energy costs, large firms tend to use the additional resources to cover capital R&D expenditures. In fact, our estimates indicate that the primary consequence of a subsidy in large firms is that the firms temporarily redirect their R&D funds between the categories by increasing the capital element, but cutting the current one, which they counterbalance after the subsidy expires, because perhaps they primarily use the projects as an opportunity to saturate their R&D capital needs.
Figure 1 demonstrates the discontinuity graphically with the help of RD plots. The graphs depict the (log of) privately funded R&D expenditures of successful applicants in compar- ison with unsuccessful ones around the cut-off in the pre-subsidy, subsidy, and post- subsidy periods. The cut-off is delineated by zero on the horizontal axis and the fitted lines that facilitate the comparison are estimated by linear repressions separately above and below the cut-off. The graphs confirm a noticeably positive discontinuity for SMEs (upper panel) after receiving a subsidy, while there was little difference beforehand. But in large firms (lower panel), if anything, the discontinuity is negative, as if the subsidy did not happen.
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