RESEARCH ARTICLE
The effect of output additionality of public funding support on firm innovation. Evidence from firms of different sizes
Antonio Prencipe,
Luciano D'Amico,
Danilo Boffa,
Christian Corsi,
Corresponding Author
Antonio Prencipe
Department of Communication Sciences, University of Teramo, Teramo, Italy
Correspondence
Antonio Prencipe, Department of Communication Sciences, University of Teramo, Via R. Balzarini 1, 64100 Teramo, Italy.
Email: [email protected]
Search for more papers by this authorLuciano D'Amico
Department of Communication Sciences, University of Teramo, Teramo, Italy
Search for more papers by this authorDanilo Boffa
Department of Communication Sciences, University of Teramo, Teramo, Italy
Search for more papers by this authorChristian Corsi
Department of Communication Sciences, University of Teramo, Teramo, Italy
Search for more papers by this authorAntonio Prencipe,
Luciano D'Amico,
Danilo Boffa,
Christian Corsi,
Corresponding Author
Antonio Prencipe
Department of Communication Sciences, University of Teramo, Teramo, Italy
Correspondence
Antonio Prencipe, Department of Communication Sciences, University of Teramo, Via R. Balzarini 1, 64100 Teramo, Italy.
Email: [email protected]
Search for more papers by this authorLuciano D'Amico
Department of Communication Sciences, University of Teramo, Teramo, Italy
Search for more papers by this authorDanilo Boffa
Department of Communication Sciences, University of Teramo, Teramo, Italy
Search for more papers by this authorChristian Corsi
Department of Communication Sciences, University of Teramo, Teramo, Italy
Search for more papers by this authorFirst published: 23 January 2023
Abstract
The article aims to study the effect of output additionality of public innovation funding on firm innovation, measured as economic returns of innovation, across firms of different sizes. A panel sample consisting of 4125 Spanish firms observed during years 2009–2014 has been analysed, using a treatment model. Robustness tests have also been used. The findings show the effects of output additionality of innovation funding support for small, medium and large firms, with a greater effect on large firms and a lower effect on medium firms. However, there has a weak effect for very large firms, which do not benefit in terms of output additionality. Since it is relatively easy for large firms to benefit from public support for innovation, some of the resources allocated to them should be passed on to small and medium firms. Medium firms seem to be less inclined to benefit from economies of scales than large firms and may be less affected by public innovation policy given the priority for small firms' development. Small and medium enterprises can benefit further from well-designed targeting programmes, with a prevalence of demand-side support measures compared to the supply-side measures.
CONFLICT OF INTEREST
There authors have no conflicts of interest (both financial and non-financial), also potential, to disclose.
Open Research
DATA AVAILABILITY STATEMENT
The data that support the findings of this study are available on request from the corresponding author. The data are not publicly available due to privacy or ethical restrictions.
REFERENCES
- Abadie, A., & Imbens, G. W. (2016). Matching on the estimated propensity score. Econometrica, 84(2), 781–807.
- Acs, Z. J., & Audretsch, D. B. (1987). Innovation, market structure, and firm size. The Review of Economics and Statistics, 69(4), 567–574.
- Acs, Z. J., & Audretsch, D. B. (1993). Analysing innovation output indicators: The US experience. In D. Bain & A. Kleinknecht (Eds.), New concepts in innovation output measurement (pp. 10–41). Palgrave Macmillan.
10.1007/978-1-349-22892-8_2 Google Scholar
- Afcha Chávez, S. M. (2011). Behavioural additionality in the context of regional innovation policy in Spain. Innovations, 13(1), 95–110.
10.5172/impp.2011.13.1.95 Google Scholar
- Almus, M., & Czarnitzki, D. (2003). The effects of public R&D subsidies on firms' innovation activities: The case of eastern Germany. Journal of Business & Economic Statistics, 21(2), 226–236.
- Arrow, K. J. (1962). Economic welfare and the allocation of resources for invention. In The rate and direction of economic activity. NBER.
10.1515/9781400879762-024 Google Scholar
- Atuahene-Gima, K. (2005). Resolving the capability—Rigidity paradox in new product innovation. Journal of Marketing, 69(4), 61–83.
- Baghana, R., & Mohnen, P. (2009). Effectiveness of R&D tax incentives in small and large enterprises in Québec. Small Business Economics, 33(1), 91–107.
- Ballot, G., Fakhfakh, F., Galia, F., & Salter, A. (2015). The fateful triangle: Complementarities in performance between product, process and organizational innovation in France and the UK. Research Policy, 44(1), 217–232.
- Baumol, W. J. (2010). The microtheory of innovative entrepreneurship. Princeton University Press.
10.2307/j.ctt21668j9 Google Scholar
- BEIS. (2014). UK innovation survey. Department for Business, Energy and Industrial Strategy.
- Beneito, P. (2006). The innovative performance of in-house and contracted R&D in terms of patents and utility models. Research Policy, 35(4), 502–517.
- Bronzini, R., & Piselli, P. (2016). The impact of R&D subsidies on firm innovation. Research Policy, 45(2), 442–457.
- Buse, S., Tiwari, R., & Herstatt, C. (2010). Global innovation: An answer to mitigate barriers to innovation in small and medium-sized enterprises? International Journal of Innovation and Technology Management, 7(3), 215–227.
10.1142/S0219877010001970 Google Scholar
- Busom, I., & Fernández-Ribas, A. (2008). The impact of firm participation in R&D programmes on R&D partnerships. Research Policy, 37(2), 240–257.
- Cameron, A. C., & Trivedi, P. K. (2005). Microeconometrics: Methods and applications. Cambridge University Press.
10.1017/CBO9780511811241 Google Scholar
- Cancino, C. A., Bonilla, C. A., & Vergara, M. (2015). The impact of government support programs for the development of businesses in Chile. Management Decision, 53(8), 1736–1754.
- Cano-Kollmann, M., Hamilton, R. D., & Mudambi, R. (2016). Public support for innovation and the openness of firms' innovation activities. Industrial and Corporate Change, 26(3), 421–442.
- Carmichael, J. (1981). The effects of Mission-Oriented Public R&D Spending on private industry. The Journal of Finance, 36(3), 617–627.
- Cassiman, B., & Veugelers, R. (2006). In search of complementarity in innovation strategy: Internal R&D and external knowledge acquisition. Management Science, 52(1), 68–82.
- Cerulli, G. (2010). Modelling and measuring the effect of public subsidies on business R&D: A critical review of the econometric literature. Economic Record, 86(274), 421–449.
- Cerulli, G. (2012). Ivtreatreg: A new STATA routine for estimating binary treatment models with heterogeneous response to treatment under observable and unobservable selection. CNR-Ceris Working Papers, 3, 12.
- Cerulli, G. (2015). Econometric evaluation of socio-economic programs theory and applications. Springer.
10.1007/978-3-662-46405-2 Google Scholar
- Cerulli, G., & Potì, B. (2008). Evaluating the effect of public subsidies of firm R&D activity: An application to Italy using the community innovation survey. Ceris-CNR.
- Cerulli, G., & Potì, B. (2012). The differential impact of privately and publicly funded R&D on R&D investment and innovation: The Italian case. Prometheus, 30(1), 113–149.
10.1080/08109028.2012.671288 Google Scholar
- Chapman, G., & Hewitt-Dundas, N. (2018). The effect of public support on senior manager attitudes to innovation. Technovation, 69, 28–39.
- Clarysse, B., Wright, M., & Mustar, P. (2009). Behavioural additionality of R&D subsidies: A learning perspective. Research Policy, 38(10), 1517–1533.
- Coad, A., Segarra, A., & Teruel, M. (2016). Innovation and firm growth: Does firm age play a role? Research Policy, 45(2), 387–400.
- Cohen, W. M. (2010). Fifty years of empirical studies of innovative activity and performance. In B. H. Hall & N. Rosenberg (Eds.), Handbook of the economics of innovation (volume 1) (pp. 129–213). Elsevier B.V.
10.1016/S0169-7218(10)01004-X Google Scholar
- Cohen, W. M., & Klepper, S. (1996). Firm size and the nature of innovation within industries: The case of process and product R&D. Review of Economics and Statistics, 78(2), 232–243.
- Cohendet, P., & Meyer-Krahmer, F. (2001). The theoretical and policy implications of knowledge codification. Research Policy, 30(9), 1563–1591.
- Czarnitzki, D., & Delanote, J. (2015). R&D policies for young SMEs: Input and output effects. Small Business Economics, 45(3), 465–485.
- Czarnitzki, D., & Delanote, J. (2017). Incorporating innovation subsidies in the CDM framework: Empirical evidence from Belgium. Economics of Innovation and New Technology, 26(1–2), 78–92.
- Czarnitzki, D., & Hussinger, K. (2018). Input and output additionality of R&D subsidies. Applied Economics, 50(12), 1324–1341.
- Czarnitzki, D., & Lopes Bento, C. (2012). Evaluation of public R&D policies: A cross-country comparison. World Review of Science, Technology and Sustainable Development, 9(2–4), 254–282.
10.1504/WRSTSD.2012.047690 Google Scholar
- De Marchi, V. (2012). Environmental innovation and R&D cooperation: Empirical evidence from Spanish manufacturing firms. Research Policy, 41(3), 614–623.
- Duguet, E. (2004). Are R&D subsidies a substitute or a complement to privately funded R&D? Evidence from France using propensity score methods for non-experimental data. Revue d'Economie Politique, 114(2), 263–292.
- European Commission. (2014). A study on R&D tax incentive. Annex: Country fiches, in Taxation Papers. Brussels.
- Gelabert, L., Fosfuri, A., & Tribó, J. A. (2009). Does the effect of public support for R&D depend on the degree of appropriability? The Journal of Industrial Economics, 57(4), 736–767.
- González, X., Miles-Touya, D., & Pazó, C. (2016). R&D, worker training and innovation: Firm-level evidence. Industry and Innovation, 23(8), 694–712.
- González, X., & Pazó, C. (2008). Do public subsidies stimulate private R&D spending? Research Policy, 37(3), 371–389.
- Granstrand, O., Patel, P., & Pavitt, K. (1997). Multi-technology corporations: Why they have “distributed” rather than “distinctive core” competencies. California Management Review, 39(4), 8–25.
- Griliches, Z. (1990). Patent statistics as economic indicators: 1990. National Bureau of Economic Research.
10.3386/w3301 Google Scholar
- Grilli, L., & Murtinu, S. (2011). Econometric evaluation of public policies for science and innovation: A brief guide to practice. In Science and innovation policy for the new knowledge economy. Edward Elgar Publishing.
10.4337/9780857930538.00012 Google Scholar
- Guo, D., Guo, Y., & Jiang, K. (2016). Government-subsidized R&D and firm innovation: Evidence from China. Research Policy, 45(6), 1129–1144.
- Hadjimanolis, A. (1999). Barriers to innovation for SMEs in a small less developed country (Cyprus). Technovation, 19(9), 561–570.
- Hall, B. H. (2002). The financing of research and development. Oxford Review of Economic Policy, 18(1), 35–51.
- Heckman, J. J., & Vytlacil, E. J. (2000). The relationship between treatment parameters within a latent variable framework. Economics Letters, 66(1), 33–39.
- Herrera, L., & Sánchez-González, G. (2013). Firm size and innovation policy. International Small Business Journal, 31(2), 137–155.
- Hewitt-Dundas, N., & Roper, S. (2010). Output additionality of public support for innovation: Evidence for Irish manufacturing plants. European Planning Studies, 18(1), 107–122.
- Imai, K., & Ratkovic, M. (2013). Estimating treatment effect heterogeneity in randomized program evaluation. The Annals of Applied Statistics, 7(1), 443–470.
- Klette, T. J., & Moen, J. (1998). R&D investment responses to R&D subsidies: A theoretical analysis and econometric evidence. Paper presented at the NBER Summer Institute, July.
- Köhler, C., Laredo, P., & Rammer, C. (2012). The impact and effectiveness of fiscal incentives for R&D. Nesta working paper 12/01. London: NESTA.
- Leiponen, A., & Byma, J. (2009). If you cannot block, you better run: Small firms, cooperative innovation, and appropriation strategies. Research Policy, 38(9), 1478–1488.
- Levin, R. C., Klevorick, A. K., Nelson, R. R., Winter, S. G., Gilbert, R., & Griliches, Z. (1987). Appropriating the returns from industrial research and development. Brookings Papers on Economic Activity, 3, 783–831.
10.2307/2534454 Google Scholar
- Link, A. N., & Scott, J. T. (2019). The theory and practice of public-sector R & D economic impact analysis. In A. N. Link & J. T. Scott (Eds.), The social value of new technology (pp. 2–42). Edward Elgar Publishing.
10.4337/9781788116336.00007 Google Scholar
- Lokshin, B., & Mohnen, P. (2012). How effective are level-based R&D tax credits? Evidence from The Netherlands. Applied Economics, 44(12), 1527–1538.
- Loof, H., & Heshmati, A. (2007). On private R&D investment: New evidence from a firm level innovation study. In Commercialization and transfer of technology: Major Country Case Studies (p. 77). Nova Science Pub Inc.
- Martin, S., & Scott, J. T. (2000). The nature of innovation market failure and the design of public support for private innovation. Research Policy, 29(4–5), 437–447.
- Morgan, G. (1996). Imágenes de la organización. Editorial Alfaomega.
- Nauwelaers, C. C. E. M. G., & Wintjes, R. J. M. (2000). SME policy and the regional dimension of innovation: Towards a new paradigm for innovation policy? MERIT, Maastricht Economic Research Institute on Innovation and Technology, Research Memoranda.
- Nelson, R. R. (1959). The simple economics of basic scientific research. Journal of Political Economy, 67(3), 297–306.
- OECD. (2007). OECD science, technology and industry scoreboard 2007: Innovation and performance in the global economy. OECD.
10.1787/sti_scoreboard-2007-en Google Scholar
- Pla-Barber, J., & Alegre, J. (2007). Analysing the link between export intensity, innovation and firm size in a science-based industry. International Business Review, 16(3), 275–293.
- Potì, B., & Cerulli, G. (2011). Evaluation of firm R&D and innovation support: New indicators and the ex-ante prediction of ex-post additionality. Research Evaluation, 20(1), 19–29.
- Powell, W. W., Koput, K. W., & Smith-Doerr, L. (1996). Interorganizational collaboration and the locus of innovation: Networks of learning in biotechnology. Administrative Science Quarterly, 41(1), 116–145.
- Radicic, D., & Pugh, G. (2017). R&D programmes, policy mix, and the ‘European paradox’: Evidence from European SMEs. Science and Public Policy, 44(4), 497–512.
- Radicic, D., Pugh, G., Hollanders, H., Wintjes, R., & Fairburn, J. (2016). The impact of innovation support programs on small and medium enterprises innovation in traditional manufacturing industries: An evaluation for seven European Union regions. Environment and Planning C: Government and Policy, 34(8), 1425–1452.
- Santarelli, E., & Sterlacchini, A. (1990). Innovation, formal vs. informal R&D, and firm size: Some evidence from Italian manufacturing firms. Small Business Economics, 2(3), 223–228.
10.1007/BF00389530 Google Scholar
- Stock, G. N., Greis, N. P., & Fischer, W. A. (2002). Firm size and dynamic technological innovation. Technovation, 22(9), 537–549.
- Susana Marques, C., & Monteiro-Barata, J. (2006). Determinants of the innovation process: An empirical test for the Portuguese manufacturing industry. Management Research: Journal of the Iberoamerican Academy of Management, 4(2), 113–126.
10.2753/JMR1536-5433040203 Google Scholar
- Szulanski, G. (1996). Exploring internal stickiness: Impediments to the transfer of best practice within the firm. Strategic Management Journal, 17(2), 27–43.
- Thoemmes, F. J., & Kim, E. S. (2011). A systematic review of propensity score methods in the social sciences. Multivariate Behavioral Research, 46(1), 90–118.
- Uhlaner, L. M., van Stel, A., Duplat, V., & Zhou, H. (2013). Disentangling the effects of organizational capabilities, innovation and firm size on SME sales growth. Small Business Economics, 41(3), 581–607.
- Veugelers, R. (1997). Internal R&D expenditures and external technology sourcing. Research Policy, 26(3), 303–315.
- Veugelers, R., & Cassiman, B. (1999). Make and buy in innovation strategies: Evidence from Belgian manufacturing firms. Research Policy, 28(1), 63–80.
- What Works Centre for Local Economic Growth. (2015). What works Centre for Local Economic Growth. ESRC.
- Zemplinerová, A., & Hromádková, E. (2012). Determinants of firms innovation. Prague Economic Papers, 21(4), 487–503.
- Zúñiga-Vicente, J. Á., Alonso-Borrego, C., Forcadell, F. J., & Galán, J. I. (2014). Assessing the effect of public subsidies on firm R&D investment: A survey. Journal of Economic Surveys, 28(1), 36–67.
