Additionality Effects of Public R&D Funding: 'R' versus 'D'

Several studies have already addressed the question whether R&D subsidies lead to additionality effects or crowd out firms' private investment. This paper provides insights into the impact of R&D grants on private R&D expenditure, distinguishing between research and development activities. We employ parametric treatment effects models and IV regression methods. The hypothesis that firms respond differently to R&D subsidies depending on the nature of the R&D activity is confirmed. R&D subsidies are found to mainly contribute to an increase in development expenditure. By contrast, crowding out effects for the research part cannot be rejected.

Aerts, Kris and Susanne Thorwarth (2008), Additionality Effects of Public R&D Funding: 'R' versus 'D', FBE Research Report, K.U.Leuven