Page 8 - IDEA Studie 07 2023 TACR

ARE SUBSIDIES TO BUSINESS R&D EFFECTIVE? REGRESSION
DISCONTINUITY EVIDENCE FROM THE TA CR ALFA PROGRAMME IDEA 2023
administrative data. We estimate to what extent participation in the ALFA programme stimulated new R&D activities that would not have occurred without the subsidy. To the best of our knowledge, this is the first time this has been estimated based on quasi- experimental variation worldwide. Additionally, we investigate the effects of the subsidies on R&D outputs and economic performance of firms. Hence, we trace the whole chain of effects that such subsidies have been hypothesized to entail, from R&D all the way to the market.
The effects of R&D grants might be greater for small and medium-sized enterprises (SMEs) than for large firms, for at least three reasons. Firstly, SMEs are more likely to be credit constrained and may find it more difficult to finance their R&D investments in the absence of a subsidy (Hall and Lerner 2010). Secondly, large firms tend to undertake more R&D projects in parallel and, consequently, can more easily identify a project that is likely to succeed in a grant competition among projects that they would undertake in any case, with or without a subsidy. Thirdly, smaller firms can be expected to disproportionately benefit from the “certification” effects of receiving a competitive subsidy (Feldman and Kelley, 2006; Meuleman & De Maeseneire, 2012). Given the theoretical reasons for expecting different results for SMEs and large firms, together with empirical evidence supportive of such differential effects (see, for example, González and Pazó 2008, Bronzini and Iachini 2014 and Romero-Jordán et al. 2014), we conduct all analyses separately for SMEs (defined as firms with <250 employees) and for large firms.
Our results show that the subsidies significantly stimulated R&D expenditures in small and medium size enterprises (SMEs), but not in large ones. In the SMEs, the effect is strongly positive both on publicly and privately funded R&D, and both during a subsidised project and afterwards; thus, there is strong support for persistent crowding in. In the large firms, the subsidy appears to have changed only the structure of R&D expenditure during a project, by increasing funding from public sources at the expense of private sources, and by increasing capital expenditure at the expense of current expenditure. The results thus suggest crowding-out effects in large firms in the short term, and largely insignificant effects after the project expires. When looking at the outputs of innovation and economic outcomes, however, we do not find any evidence of positive effects of the subsidies on patenting, employment, sales, or labour productivity, regardless of subsidy size, either during or after the project.
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