This study investigates the impact of public R&D subsidies on R&D investment of small and mediumsized enterprises (SMEs) in Germany during the most recent economic crisis. Our analysis is based on firm-level data of the Mannheim Innovation Panel (MIP) covering the period 2006-2010. While we find an overall positive effect of R&D subsidies on SMEs' R&D investment behavior, there is evidence for a crowding out effect for the crisis year 2009. In 2010, when the German economy started to recover, the subsidy effect is smaller than in the pre-crisis years, but positive and significant. Additional tests indicate that the temporary crowding out effect was caused by reluctant innovation investment behavior of the subsidy recipients rather than by Germany's countercyclical innovation policy during the crisis.

This study investigates the impact of public R&D subsidies on R&D investment of small and mediumsized enterprises (SMEs) in Germany during the most recent economic crisis. Our analysis is based on firm-level data of the Mannheim Innovation Panel (MIP) covering the period 2006-2010. While we find an overall positive effect of R&D subsidies on SMEs' R&D investment behavior, there is evidence for a crowding out effect for the crisis year 2009. In 2010, when the German economy started to recover, the subsidy effect is smaller than in the pre-crisis years, but positive and significant. Additional tests indicate that the temporary crowding out effect was caused by reluctant innovation investment behavior of the subsidy recipients rather than by Germany's countercyclical innovation policy during the crisis.

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Innovation, Creative Destruction and Structural Change: Firm-level Evidence from European Countries AbstractThe shift of employment from lower to higher productive firms is an important driver for structural change and industry dynamics. We investigate this reallocation in terms of employment gains and losses from innovation. New employment created by product innovation may be offset by employment losses in related products, known as 'cannibalisation' or 'business stealing' effects in the literature, by employment losses from process and organisational innovation and by general productivity increases. The paper investigates this effect empirically with a large dataset from the European Community Innovation Survey (CIS). We find that employment gains and losses increase with technology intensity of the sector. Hightechnology manufacturing shows the strongest employment gains and losses from innovation, followed by knowledge-intensive services, low-technology manufacturing and less knowledge-intensive services.The net contribution of innovation to employment growth is mostly positive, an exception being manufacturing industries in recession periods.JEL: O33, J23, C26, D2