National or international public funding? Subsidies or loans? Evaluating the innovation impact of R&D support programmes

By , Professor at Universidad Complutense de Madrid

This working paper is co-authored by Lourdes Moreno.

The objective of this study is to compare the effect of different types of public support for R&D projects on firms’ technological capabilities. We distinguish between low-interest loans and subsidies and between national and European support. Using data on 2,319 Spanish firms during the period 2002-2005, we estimate a multivariate probit to analyse the determinants of firms’ participation in public R&D programmes and, later, the impact of this participation on firms’ technological capabilities using different indicators. The results provide evidence of the effectiveness of all treatments for improving firms’ innovative performance. Specifically, although the three kinds of public aid stimulate the intensity of R&D investment, the highest impact corresponds to soft credits. In addition, national subsidies have a higher impact on internal R&D intensity than EU grants, but the opposite relation is found as regards total R&D intensity. With respect to innovation outputs, apart from the indirect effect of public support by stimulating R&D intensity, we also find evidence of a direct effect of participation in the CDTI credit system and in the European subsidy programme on the probability of obtaining product innovations and applying for patents.