Direct Public Support of R&D and Innovation in Czech Firms: Unintended Consequences and Possible Peltzman Effect

Abstract

This paper investigates the complex relationship between direct public support for innovation projects, being continuous innovator, and turnover growth, with a particular emphasis on the possibility of a Peltzman effect. The quantitative analysis investigates whether companies incentivized by direct subsidies prefer safer projects over riskier, groundbreaking innovations, using the 2014 Czech innovation dataset and an extensive literature review. The findings show a link between firms that receive public funding and those that engage in continuous or occasional innovation activities. However, the impact on turnover growth is not positive, implying that, on average, public subsidies do not significantly contribute to turnover growth. Concerns are raised in the study about potential market distortions, inefficient resource allocation, and the dynamics of collaboration among large firms in publicly funded projects. While acknowledging the models' exploratory nature, the study emphasizes the importance of ongoing scrutiny and refinement of innovation policies to ensure their effectiveness in promoting genuine innovation while mitigating unintended consequences.