Abstract
We analyse all the major sources of direct and indirect research and development (R&D) support to the business enterprise sector in a single country, Norway, for the period 2002–2013, treating the financial support for R&D from several instruments as a multivariate dose exposure. The output additionality of support to incumbent firms that regularly perform R&D (R&D-incumbents), which obtain about 65 per cent of all R&D support to business enterprises, is insignificant for any instrument or policy mixture. However, the estimated additionality of support to R&D-starters (firms without prior R&D activity), which obtain about 30 per cent of all R&D support, is generally positive. In this firm category, the main instruments for direct R&D support in Norway generate significantly less output and economic activity per NOK 1 million in support than do tax credits, despite the fact these instruments manage large project portfolios at considerable administrative costs. We do not identify positive effects of R&D support on labour productivity or the return on assets for any of the instruments. Our main policy implication is that R&D instruments for the business enterprise sector should be designed in favour of R&D-starters over R&D-incumbents, that is, shifting the focus from the intensive to the extensive margin.
Highlights
There is a general understanding among economists that technological progress is closely linked to economic growth and that it is spurred by investment in research and development (R&D)
Our data have three unique features that we exploit to address such issues: (1) we have full coverage of limited liability firms receiving support over a relatively long time (2002–2013); (2) the data on public support are merged with other public registers that contain detailed information on accounting variables, employment and intellectual property rights (IP); and (3) the register data are merged with survey data on firms’ R&D expenditures, which enables us to track the R&D history prior to obtaining support for more than 85 per cent of the firms that received any kind of public R&D subsidies during the observation period
The ideal way to assess the effectiveness of the R&D support schemes might be through a cost–benefit analysis taking into account all direct effects, spillover effects, administrative costs and the opportunity costs of inputs used in production
Summary
There is a general understanding among economists that technological progress is closely linked to economic growth and that it is spurred by investment in research and development (R&D) (e.g., see Romer, 1990). We study a set of outcome variables related to output, employment, labour productivity (output per employee) and profitability These outcome variables are highly relevant from a policy perspective as the subsidy instruments analysed are all intended to contribute to increased activity in R&Dintensive industries. The literature focusing on output additionality or other outcome measures is much more limited.4 Bronzini and Iachini (2014) and Bronzini and Piselli (2016) find positive effects on patenting of an R&D subsidy program in northern Italy, whereas Cappelen et al (2012) find that the introduction of R&D tax credits in Norway contributed to an increase in (self-reported) new products and processes, but not to more patent applications.
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