The Effects of Public R&D Subsidies on Firms' Innovation Activities: The Case of Eastern Germany

This study analyses the effects of public R&D policy schemes on the innovation activities of firms located in Eastern Germany. This is the first study which considers the effects of public R&D programmes in a transition economy. The main question in this context is whether public funds stimulate R&D activities or simply crowd out privately financed R&D. Empirically, we investigate the causal effects of all public R&D schemes in Eastern Germany using a matching approach. It turns out that firms increase their innovation activities if they receive public funding. However, this effect decreases with firm size.

Almus, Matthias and Dirk Czarnitzki (2001), The Effects of Public R&D Subsidies on Firms' Innovation Activities: The Case of Eastern Germany, ZEW Discussion Paper No. 01-10, Mannheim.