A dose–response evaluation of a regional R&D subsidies policy

Abstract

This paper evaluates the effects of a regional R&D policy in the Italian province of Trento from 2002 to 2007, an ideal testing ground for the role of local government and the effectiveness of an R&D place-based policy. Exploiting a unique database and using a counterfactual dose-response regression model, we perform an evaluation exercise of policy targets concerning employment, fixed and intangible assets.We find that two years after the award date, there exists a range of subsidy doses that is effective in stimulating employment and intangible assets growth. Instead, we do not find any additionality of the policy on fixed assets. At longer time span, i.e. four years after the award, the effect on employment growth persists and we do observe a mild effect on labor quality for intermediate grants spending. Moreover, the effect on intangible assets spending growth is also persistent for a similar interval of R&D subsidies amounts. We discuss the impact with respect to the aims of the policy maker, suggesting that policy makers should fine tune the intensity of the subsidy to maximize the overall policy impact.

When Daces Bite Deeper than Sharks – Does the SMEs Public Subsidy Dose Matter?

“…Although there are many studies examining the impact of EU subsidies on SMEs, there are still very few that consider the intensity of support, the dose. We have found only four: Cerulli et al, 2020;Marino et al, 2016;Bondonio and Greenbaum, 2014;Ginevičius et al, 2007). Moreover, most of the studies focus on specific programmes and usually on short-term effects.…”

“…So far, only several studies have been carried out that reflected the support dose of EU funding. Research from the Italian province of Trento (Cerulli et al, 2020) found positive effects of EU subsidies (intermediate support doses) on employment, labour quality, and growth of intangible assets, but also showed inefficiency of very small and very large projects. French evaluation of a regional research and development subsidy policy pointed to an increase in private research and development spending with large subsidies, but revealed a low impact with small subsidies (Marino et al, 2016).…”

A micro-founded approach to regional innovation in Italy

“…Moreover, the benets of these additional subsidies may be more persistent, as they may not only ease the immediate realization of the project, but also favor R&D increases and upskilling (Mariani & Mealli, 2018;Cerulli et al, 2020). This could be crucial in order to increase the absorptive capacity of small rms, especially those located in the less innovative regions.…”

Subsidising Innovation Outside or Within Firms’ Existing Knowledge Base: Which Is Best for Radical Innovation?

“…Governments in many countries provide firms with public financial support for their research and innovation (R&I) activities (Link and Scott 2013;OECD 2023). Subsidising firm-level R&I can generate socio-economic returns, including improved economic performance, and high-quality employment (Choi and Lee 2021;Cerulli et al 2022). Academics and policymakers increasingly recognise that such returns are more likely to arise when public financial support for R&I results in radical innovation in firms (Beck et al 2016;Laplane and Mazzucato 2020;OECD 2021).…”

“…There is also a risk of deadweight spending effects, as such firms may use public financial support to carry out R&I activities that they would have carried out anyway (Lenihan 2004;Pereira and Suárez 2018;Mina et al 2021). Investigating whether public financial support for R&I results in radical innovation when focused on these two groups of firms is thus vital, as it can usefully inform a more impactful allocation of public financial support for R&I (Fiorentin et al 2019;Berrutti and Bianchi 2020;Cerulli et al 2022).…”