Advertisement

Review of Industrial Organization

, Volume 43, Issue 3, pp 193–220 | Cite as

Persistence in R&D Performance and its Implications for the Granting of Subsidies

  • Pere Arqué-CastellsEmail author
Article

Abstract

We study whether R&D subsidies can be used to encourage sustained R&D performance. To this end we measure the importance of true state dependence (TSD) in R&D performance and of subsidies’ inducement effects. Estimates that are based on a panel of Spanish manufacturing firms that are observed during the period 1998–2009 reveal that both magnitudes are positive and significant. Simulations that are carried out with the estimated parameters show that subsidies can generate permanent inducement effects for 9 % of Spanish manufacturing firms. The subsidy shares that are needed to generate permanent inducement effects among small firms (firms with fewer than 200 employees) are larger than those that are needed to generate permanent inducement effects among large firms (firms with 200 or more employees).

Keywords

Dynamic discrete models Persistence R&D Subsidies 

JEL Classification

H2 O2 C1 D2 

Notes

Acknowledgments

I thank the editor Lawrence J. White and one anonymous referee for providing many helpful comments that greatly improved the article. I am grateful to Pierre Mohnen and José García-Quevedo for their excellent supervision. I am also grateful to Elena Huergo, Georg Licht, Alejandro Esteller-Moré, Martí Parellada for their helpful comments. Financial support from the Spanish Ministry of Science and Education (ECO2010-16934) and from the Generalitat of Catalonia (2009SGR102) is gratefully acknowledged.

References

  1. Arulampalam, W. (1999). A note on estimated coefficients in random effects probit models. Oxford Bulletin of Economics and Statistics, 61, 597–602.CrossRefGoogle Scholar
  2. Aschhoff, B. (2010). Who gets the money? The dynamics of R &D project subsidies in Germany. Jahrbücher für Nationalökonomie und Statistik, 230(5), 522–546.Google Scholar
  3. Blanes, J. V., & Busom, I. (2004). Who participates in R &D subsidy programs? The case of Spanish manufacturing firms. Research Policy, 33(10), 1459–1476.CrossRefGoogle Scholar
  4. Cameron, A. C., & Trivedi, P. K. (2009). Microeconometrics using stata. Lakeway Drive, TX: Stata Press.Google Scholar
  5. Cefis, E. (2003). Is there persistence in innovative activities? International Journal of Industrial Organization, 21, 489–515.CrossRefGoogle Scholar
  6. Cefis, E., & Orsenigo, L. (2001). The persistence of innovative activities, a cross-countries and cross-sectors comparative analysis. Research Policy, 30, 1139–1158.CrossRefGoogle Scholar
  7. European Commission. (2006). Community framework for state aid for research and development and innovation. Official Journal of the European Union. (2006/C 323/01).Google Scholar
  8. David, P., Hall, B. H., & Toole, A. (2000). Is public R &D a complement or substitute for private R &D? A review of the econometric evidence. Research Policy, 29, 497–529.CrossRefGoogle Scholar
  9. Doraszelski, U., & Jaumandreu, J. (2009). R &D and productivity: Estimating endogenous productivity. Retrieved February 18, 2013, from http://people.bu.edu/jordij/papers/ip20090414.pdf.
  10. Duguet, E., & Monjon, S. (2002). Creative destruction and the innovative core: Is innovation persistent at the firm level? Retrieved February 18, 2013, from University College London Web site: http://eprints.ucl.ac.uk/2556/.
  11. Eslava, M., Haltiwanger, J., Kugler, A., & Kugler, M. (2004). The effects of structural reforms on productivity and profitability enhancing reallocation: Evidence from Colombia. Journal of Development Economics, 75(2), 333–372.Google Scholar
  12. Flaig, G., & Stadler, M. (1994). Success breeds success. The dynamics of the innovation process. Empirical Economics, 19, 55–68.CrossRefGoogle Scholar
  13. García-Quevedo, J. (2004). Do public subsidies complement business R &D? A meta-analysis of the econometric evidence. Kyklos, 57, 87–102.CrossRefGoogle Scholar
  14. González, X., Jaumandreu, J., & Pazó, C. (2005). Barriers to innovation and subsidy effectiveness. Rand Journal of Economics, 36(4), 930–949.Google Scholar
  15. González, X., & Pazó, C. (2008). Do public subsidies stimulate private R &D spending? Research Policy, 37, 371–389.CrossRefGoogle Scholar
  16. Geroski, P. A., Van Reenen, J., & Walters, C. F. (1997). How persistently do firms innovate? Research Policy, 26, 33–48.CrossRefGoogle Scholar
  17. Heckman, J. J. (1981). The incidental parameters problem and the problem of initial conditions in estimating discrete time-discrete data stochastic process. In C. F. Manski & D. McFadden (Eds.), Structural analysis of discrete data with econometric applications. Cambridge, MA: MIT Press.Google Scholar
  18. Huergo, E., & Jaumandreu, J. (2004). Firm’s age, process innovation and productivity growth. International Journal of Industrial Organization, 22, 541–559.CrossRefGoogle Scholar
  19. Huergo, E., & Trenado, M. (2010). The application for and the awarding of low-interest credits to finance R &D projects. Review of Industrial Organization, 37, 237–259.CrossRefGoogle Scholar
  20. Hyslop, D. (1999). State dependence, serial correlation and heterogeneity in intertemporal labor force participation of married woman. Econometrica, 67, 1255–1294.CrossRefGoogle Scholar
  21. Mairesse, J., & Jaumandreu, J. (2005). Panel-data estimates of the production function and the revenue function: What difference does it make? Scandinavian Journal of Economics, 107(4), 651–672.CrossRefGoogle Scholar
  22. Malerba, F., & Orsenigo, L. (1999). Technological entry, exit and survival: An empirical analysis of patent data. Research Policy, 28, 643–660.CrossRefGoogle Scholar
  23. Malerba, F., Orsenigo, L., & Peretto, P. (1997). Persistence of innovative activities, sectoral patterns of innovation and international technological specialization. International Journal of Industrial Organization, 15, 801–826.CrossRefGoogle Scholar
  24. Mañez, J., Rochina, M. E., Sanchis, A., & Sanchis, J. A. (2009). The role of sunk costs in the decision to invest in R &D. The Journal of Industrial Economics, 57(4), 712–735.CrossRefGoogle Scholar
  25. Mohnen, P., Palm, F. C., Schim van der Loeff, S., & Tiwari, A. (2008). Financial constraints and other obstacles: Are they a threat to economic activity? De Economist, 156, 201–214.CrossRefGoogle Scholar
  26. Mundlak, Y. (1978). On the pooling of time series and cross section data. Econometrica, 46, 69–85.CrossRefGoogle Scholar
  27. Peters, B. (2007). Nothing’s gonna stop innovators now? An empirical investigation on the success breeds success. Retrieved February 18, 2013, from http://www.webmeets.com/files/papers/EARIE/2007/492/PetersBettina.pdf
  28. Peters, B. (2009). Persistence of innovation: Stylised facts and panel data evidence. Journal of Technology Transfer, 34, 226–243.CrossRefGoogle Scholar
  29. Raymond, W., Mohnen, P., Palm, F., & Schim, S. (2010). Persistence of innovation in Dutch manufacturing: Is it spurious? Review of Economics and Statistics, 92(3), 495–504.CrossRefGoogle Scholar
  30. Roberts, M. J., & Tybout, J. R. (1997). The decision to export in Colombia: An empirical model of entry with sunk costs. American Economic Review, 87, 545–564.Google Scholar
  31. Santos, C. D. (2009). Recovering the sunk costs of R &D: The moulds industry case. Retrieved February 18, 2013, from the Center for Economic Performance Web site: http://eprints.lse.ac.uk/28689/1/dp0958.pdf.
  32. Savignac, F. (2006). The impact of financial constraints on innovation: Evidence from French manufacturing firms. Retrieved February 18, 2013, from http://halshs.archives-ouvertes.fr/docs/00/11/57/17/PDF/V06042.pdf.
  33. Stewart, M. (2007). The interrelated dynamics of unemployment and low-wage employment. Journal of Applied Econometrics, 22, 511–531.CrossRefGoogle Scholar
  34. Sutton, J. (1991). Sunk costs and market structure. Cambridge: MA, MIT Press.Google Scholar
  35. Takalo, T., Tanayama, T., & Toivanen, O. (2013). Estimating the benefits of targeted R &D subsidies. The Review of Economics and Statistics (in press). doi: 10.1162REST_a-00280.
  36. Wooldridge, J. (2005). Simple solutions to the initial conditions problem in dynamic nonlinear panel data models with unobserved heterogeneity. Journal of Applied Econometrics, 20(1), 39–54.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Facultat d’Economia i EmpresaInstitut d’Economia de Barcelona, Universitat Autònoma de BarcelonaBellaterraSpain

Personalised recommendations