Do Capital Incentive Policies Support Today’s Digitization Needs?

Public support schemes are typically targeted towards capital investments. However, the targeting of digitization investments might not only be a missed opportunity to increase the usage of state-of-the-art digital services in the economy, but might even lower the uptake thereof. This paper exploits variation in the eligibility and the size of potential investment subsidies of German firms in order to analyse the relationship with the firms’ propensity to adopt cloud services. Our empirical results are in line with the hypothesis that capital investment schemes lower the use of cloud services by firms: the higher the potential subsidy for investments, the lower the incentive for firms to adopt cloud services. We consider this finding an unintended policy effect which is highly relevant for policy makers, as the adoption of cloud services has been linked to various benefits on the firm as well as on the aggregate economy level.

Andres, Raphaela, Thomas Niebel und Steffen Viete (2024), Do Capital Incentive Policies Support Today’s Digitization Needs? , Telecommunications Policy 48(1) , 102646