The Impact of R&D Subsidy on Innovation

The Impact of R&D Subsidy on Innovation: a Study of New Zealand Firms by Adam B. Jaffe, Trinh Le – #21479 (PR)

Abstract:

This paper examines the impact of government assistance through R&D grants on innovation output for firms in New Zealand. Using a large database that links administrative and tax data with survey data, we are able to control for large number of firm characteristics and thus minimise selection bias. We find that receipt of an R&D grant significantly increases the probability that a firm in the manufacturing and service sectors applies for a patent during 2005–2009, but no positive impact is found on the probability of applying for a trademark. Using only firms that participated in the Business Operation Survey, we find that receiving a grant almost doubles the probability that a firm introduces new goods and services to the world while its effects on process innovation and any product innovation are relatively much weaker. Moreover, there is little evidence that grant receipt has differential effects between small to medium (<50 employees) and larger firms. These findings are broadly in line with recent international evidence from Japan, Canada and Italy which found positive impacts of public R&D subsidy on patenting activity and the introduction of new products.

 

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GrueBleen
GrueBleen
6 years ago

since I don’t qualify for a free copy of the paper, and I do not do web buying (you know, identity theft paranoia), I’ll have to go with the abstract – which you mucked up, by the way. It should read:

“…differential effects between small to medium (<50 employees) and larger firms. These findings are broadly in line … "

Ok, so I'll take the bait: just why should these bastions of free market wondrousness need to be "subsidised" to do what they are supposed to do as a consequence of competing in a free market ? Does Hayek approve of this act of charity ?

GrueBleen
GrueBleen
6 years ago
Reply to  Nicholas Gruen

Oh pish tush, I know you didn’t put a “bait” in the post, I was just “baiting” the hook to find out why there needs to be government subsidy to ‘encourage’ these folks to do what free market theory says they should be eagerly doing anyway.

So, what is there a ‘subsidy’ for this ? Doesn’t “free market theory” actually work in the real world ?

GrueBleen
GrueBleen
6 years ago
Reply to  Dave

Well I should say thanks, Dave, except that now that I’ve downloaded it, I might have to read it and try to come to some kind of not entirely dumb conclusion.

Oh, the modern man’s unbearable burden of information overload.