The Interplay Between Public Procurement of Innovation and R&D Grants: Empirical Evidence From Belgium

This paper investigates the impact of Public Procurement of Innovation (PPI) and Research and Development (R&D) grants on firms' R&D investment using data from Belgian R&D-active firms over the past decade. Our empirical analysis robustly reveals a non-negligible crowding-out effect between the two instruments, suggesting a substitutive relationship. While each policy individually positively influences R&D investment, their combined implementation diminishes their effectiveness. These results challenge prevailing evidence and emphasize the need for a careful policy implementation, raising policymakers’ awareness against a blanket increase in innovation policies without considering potential interactions.

Czarnitzki, Dirk and Malte Prüfer (2024), The Interplay Between Public Procurement of Innovation and R&D Grants: Empirical Evidence From Belgium, ZEW Discussion Paper No. 24-055, Mannheim.