Small Business Economics

, Volume 45, Issue 4, pp 805–823

R&D subsidies and productivity in SMEs



This paper examines the effect of R&D subsidies on labour productivity. We use firm-level data on Finnish SMEs from 2000 to 2012 and apply a combined matching and difference-in-differences method to control for selection bias. We find no significant positive effect on labour productivity over the five-year period after a subsidy is granted. However, the results vary over time and indicate a 2–4 % negative effect on SMEs’ annual productivity growth one to 2 years after the subsidy year. Nevertheless, subsidies generate a positive employment effect and enhance firm survival. Additional scrutiny reveals that subsidies positively affect the human capital level of low-skill firms.


Productivity Subsidies R&D SMEs Industrial policy Conditional difference-in-differences 

JEL Classifications

D24 O25 O38 C21 L26 

Supplementary material

11187_2015_9658_MOESM1_ESM.docx (570 kb)
Supplementary material 1 (DOCX 570 kb)

Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.Jyväskylä University School of Business and EconomicsUniversity of JyväskyläJyväskyläFinland
  2. 2.Pellervo Economic Research PTTHelsinkiFinland

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