Serving the Right Menu of R&D Policy Instruments to Firms: An Analysis of Policy Mix Sequencing

The R&D policy instrument mix concept has become increasingly important for understanding how public R&D support drives firm-level R&D. To-date, empirical studies have conceptualised the instrument mix as a static unit, whereby firms receive multiple policy instruments at one point in time. However, firms can also receive multiple instruments in a sequence, over time. While sequencing is well rehearsed theoretically, this remains a major gap in the empirical literature. Our study evaluates, for the first time, how R&D policy instrument mix sequencing impacts firm-level R&D. We construct a unique dataset, containing almost 25,000 firm-year observations over a 17-year period for Ireland. Our analysis focuses on R&D grants, R&D tax credits, and publicly-supported academic-industry collaborations, and develops two novel approaches to measure R&D policy instrument mix sequencing. Our results suggest that R&D policy instrument mix sequencing is highly effective at driving firm-level R&D, but that some sequences are more effective than others. These findings highlight opportunities to realise superior policy outcomes through targeted sequencing.

Lenihan, Helena, Kevin Mulligan, Mauricio Perez-Alaniz and Christian Rammer (2023), Serving the Right Menu of R&D Policy Instruments to Firms: An Analysis of Policy Mix Sequencing, ZEW Discussion Paper No. 23-009, Mannheim.