Getting ready for EU Single Market: The effect of export-oriented grant schemes on firm performance

Abstract

In this paper we analyze the impact of an export-oriented grant scheme created in anticipation of accession of a country to the European Union. The scheme aimed to support activities for the introduction of new or existing products to foreign markets and technology development. We find this new policy exerted a positive effect on firm export value, total sales, value added and profits. The policy design differentiates two types of supported activities. Technology-oriented grants have a positive effect on exports and capital stock, while commercialization-oriented grants have a positive effect on exports and intermediate inputs. We have no evidence for an effect on employment and only a slight effect on total factor productivity. Overall grants targeted at technological development have more relevant economic effects than do grants for commercialization activities. A cost-benefit analysis suggests that the benefits created in value added are 139.5% of the grant scheme cost.