More subsidies, more innovation? Evaluating whether a mix of subsidies from regional, national and EU sources crowds out firm-level innovation

Mulligan, Kevin; Lenihan, Helena; Doran, Justin

doi:10.1080/21681376.2019.1580608

Cited by 13 publications

(6 citation statements)

References 7 publications

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“…However, research often highlights low levels of take-up by the smallest businesses, for a range of reasons concerning awareness, cost and poor fit between professional advisors and recipients (Bennett, 2008;Mole et al, 2017). In terms of specific support for R&D, research highlights the importance of policy focus and mix, and the potential limitations of using binary treatment indicators to capture complex intervention effects or quantitative variation in the scale of intervention (Dumont, 2017;Mulligan et al, 2019). These findings do suggest that policy mix and balance is likely to be important.…”

Section: Discussion and Limitationsmentioning

confidence: 99%

Innovation, internationalisation and the performance of microbusinesses

Henley

Song

2019

International Small Business Journal: Researching Entrepreneurs

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This article integrates internationalisation, and specifically exporting, into a conceptualisation of how innovation production leads to productivity performance in microbusinesses employing fewer than 10 people. Innovation production is reframed for the microbusiness context by focusing on knowledge acquisition and formalisation rather than on research and development (R&D) activity. Propensity score matching analysis is used to investigate British microbusiness survey data. It finds a causal process in which innovation promotes exporting activity. This in turn leads to improved productivity. In contrast to research on larger businesses, this study finds no direct link between innovation production and productivity. These findings are robust to various checks for potential endogeneity arising from feedback into innovation from internationalisation and from self-selection of high productivity firms into exporting.

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Section: Discussion and Limitationsmentioning

confidence: 99%

Innovation, internationalisation and the performance of microbusinesses

Henley

Song

2019

International Small Business Journal: Researching Entrepreneurs

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“…On the one hand, a study by Czarnitzki and Lopes Bento has found that the simultaneous use of European funding and national funding stimulates higher sales of market novelties and future patent applications at the firm level [29]. On the other hand, the study carried out by Mulligan, Lenihan and Doran has also found that resorting at the same time to the financing offered by regional, national and EU agencies leads to levels and forms of innovation with greater private or social returns [45]. However, both studies do not allow confirmation that there is complementarity between the different agencies that they analyze, since the econometric method used in these studies was not the complementarity approach (see, for example, [16,62,63]), and so their results only provide evidence of complementarity.…”

Section: Resultsmentioning

confidence: 99%

“…Therefore, it constitutes a new analytical perspective in this kind of study as well as a warning on the need to continue deepening the investigation into the interaction of the different agencies, since the few studies on this subject are consistent in pointing out that companies that receive a mix of subsidies from regional, national and EU sources achieve various kinds of benefits in the field of innovation. Likewise, society as a whole also benefits through the corresponding spillovers that these companies generate [45,64].…”

Section: Resultsmentioning

confidence: 99%

“…However, a large number of companies receive public funding from different agencies at the same time, so the interaction between these agencies can alter the results of innovation that companies get. Ignoring this reality in studies can lead to an over-or under-estimation of additionality [29,45,61]. However, the empirical research on the relationship between different innovation promotion agencies remains scarce.…”

Section: Discussionmentioning

confidence: 99%

“…Most studies on the effectiveness of innovation subsidy policies use individual data from each of the available public funding agencies, which can lead to significant over(under) estimate of additionality, since in reality a large part of the companies receive a mix of subsidies from regional, national and EU sources at the same time [45]. Therefore, knowledge of possible cases of complementarity or substitutability between the different public agencies is of crucial importance for policy makers, since with this greater knowledge they can design innovation promotion policies that are better based on an academic perspective.…”

Section: Framework Of Public Support For Innovation and Hypothesismentioning

confidence: 99%

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Public Support Agencies for Innovation in Multilevel Governance Systems: Exploring the Existence of Signs of Complementarity and Substitution

2019

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The aim of this paper is to analyze the existence of indications of complementarity/substitutability between the innovation agencies operating in Spain (regional, national, European, and Seventh Framework Programme), which will allow us to determine the corresponding asymmetries in the implementation of the so-called subsidiarity principle. The data used in the study come from the Panel de Innovación Tecnológica 2015 and 2016 (Spain). The empirical analysis has been carried out by the so-called adoption approach, having previously corrected the selection biases that may be present in the sample. The results obtained indicate that there are indications of substitution between the two Spanish agencies (regional and national), while other relationships between agencies exhibit indications of complementarity. These indications of complementarity/substitutability show that the implementation of the principle of subsidiarity between the two Spanish agencies seem to work correctly, while this implementation is much more diffuse between the two Spanish agencies and the two European agencies. Therefore, these results reveal that there is an obvious asymmetry in the implementation of the principle of subsidiarity between the different agencies. These findings may be an important guide in the decision making of managers. Knowing which agencies are substitutes and which are complementary is extremely relevant information, since it allows the advance determination of which combinations of agencies should be avoided. It also provides policy makers with relevant information for the design of more efficient innovation promotion policies. Finally, this research uses a new methodology for the evaluation of the interaction that takes place between the different public agencies for the promotion of innovation, thus contributing to policy analysts and academics, who conduct such evaluations, have at their disposal a new tool for analysis.

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R&D grants and R&D tax credits to foreign-owned subsidiaries: Does supporting multinational enterprises’ R&D pay off in terms of firm performance improvements for the host economy?

Lenihan

Mulligan²,

Doran³

et al. 2023

J Technol Transf

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The subsidiaries of foreign-owned multinational firms make significant contributions to national Research and Development (R&D) in many host countries. Policymakers in host countries often support subsidiaries’ R&D efforts, through R&D grants and R&D tax credits. A key objective of this funding is to leverage R&D-driven firm performance benefits for the host economy. However, the subsidiary's parent firm may decide not to commercially exploit the results from host country-funded R&D projects, in the host country. Therefore, supporting subsidiaries’ R&D presents a unique risk, that significant amounts of scarce public R&D funding may translate into little, or no firm performance payoffs for the host economy. To address this issue, we construct a unique panel dataset, containing 24,404 observations of firms in Ireland over a 10-year period. Using this rich data, we first evaluate the impact of R&D grants and R&D tax credits on subsidiaries’ R&D. We then examine the link between policy-induced R&D from each policy instrument, and subsidiaries’ firm performance in the host country. Our study provides the first evaluation of (1) whether public R&D funding stimulates additional R&D investment in subsidiaries, (2) whether policy-induced R&D drives subsidiaries’ firm performance in the host country, and (3) the differential effects of R&D grants and R&D tax credits. We find that both R&D policy instruments drive subsidiary R&D, and that the policy-induced R&D results in substantial host country improvements in turnover, exports, and value added. Our results suggest several policy implications, particularly for economies pursuing an R&D strategy which targets foreign-owned subsidiaries.

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More subsidies, more innovation? Evaluating whether a mix of subsidies from regional, national and EU sources crowds out firm-level innovation

Cited by 13 publications

References 7 publications

Innovation, internationalisation and the performance of microbusinesses

Innovation, internationalisation and the performance of microbusinesses

Public Support Agencies for Innovation in Multilevel Governance Systems: Exploring the Existence of Signs of Complementarity and Substitution

R&D grants and R&D tax credits to foreign-owned subsidiaries: Does supporting multinational enterprises’ R&D pay off in terms of firm performance improvements for the host economy?

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