The lack of short-term impact of cohesion policy on the competitiveness of SMEs

Abstract

The purpose of this article is to study the relationship between the competitiveness of small- and medium-sized companies and the public support offered to them in the form of direct subsidies allocated through European structural funds. Using micro-data gathered by the Operational Programme Enterprise and Innovations for Competitiveness (OPEIC) of European structural funds from 2007–2013, this analysis focuses on small- and medium-sized enterprises (SMEs) in the Czech Republic. We employed a counterfactual approach based on Propensity Score Matching (PSM), Nearest Neighbour Estimator and Difference in Difference design with two groups of companies: applicants receiving support and a control group. When using value added and value added per labour cost as the competitiveness indicators for SMEs, we found that Cohesion Policy (CP) support had no statistically significant impact on these indicators. On the other hand, we a found positive impact on personnel expenditure. These results highlight a number of doubts regarding the effectiveness of SME cohesion funding, given that a rise in personnel expenditure, which is not supported by an appropriate increase in added value, is unlikely to be sustainable.

Assessing the microeconomic effects of public subsidies on the performance of firms in the czech food processing industry: A counterfactual impact evaluation

“…However, the effect is statistically insignificant. Although the positive sign of the coefficients indicates an increase in labour cost (as suggested by Čadil et al, ), it may be due to the creation of new employment opportunities), the value added per labour cost has also increased. This result can be assessed positively—despite the growth in labour costs, a statistically significant increase was proved in the value added per labour cost reflecting the productivity of labour costs.…”

“…In our study, the supported companies manifested a statistically significant increase in value added per labour cost. Generally, the results in this context are inconsistent—while Špička et al (), Nilsson (), and Michalek () also found a positive impact of investment support on labour productivity, this has not been proven by Čadil et al ().…”

“…Therefore, it is to be expected that investment subsidisation is positively correlated with the growth of value added, as shown, for example, in the study conducted by Bergström () on the firm‐level data of manufacturing firms in Sweden. For our analysis, we used the relative indicator, that is, Value Added per Labour Cost , reflecting the firms’ efficiency regarding labour, as used, for example, by Čadil et al (), Špička et al (), Nilsson (), and Michalek (). In our study, the supported companies manifested a statistically significant increase in value added per labour cost.…”

“…To reduce the heterogeneity bias, we implement various matching techniques (kernel matching, propensity score matching and nearest neighbour matching). Implementation of three different matching techniques helps us to increase the robustness of our analysis (e. g. Čadil, Mirošník, & Rehák, ; Dvouletý, Longo, Blažková, Lukeš, & Andera, ; Khandker et al, ). It is important to mention that specifically nearest neighbour matching technique (that matches firms that are closest to each other regarding the propensity score) is different from the two previous techniques (that are based on weighted averages of almost all available firms), for details and formulas see e. g. Caliendo and Kopeinig (), Abadie et al () and Dehejia and Wahba ().…”

Effects of Soft Loans and Credit Guarantees on Performance of Supported Firms: Evidence from the Czech Public Programme START

“…Most of the recent studies in the Central and Eastern European region have been focused on the evaluation of cohesion R&D policies and those aimed at the elimination of the regional disparities, e.g., [60][61][62][63][64][65][66][67][68][69][70], policies facilitating trainings and education [71,72] and effectivity of the self-employment programmes for the unemployed [73][74][75]. However, based on a search in the databases of previously published academic articles and research reports, no study has been focused on the evaluation of entrepreneurship support through the financial instruments yet.…”