Abstract
We investigate whether the impact of direct support for business investment in RD whether the impact of support is smaller in recessions than in expansions, and whether effects vary with the treatment pattern. Using firm-level data from Spain during the period 2005 to 2014, we combine propensity score matching and difference-in-differences methods to estimate firms’ response to direct support in different phases of the cycle. Two findings stand out. First, while the impact of support on monetary investment in innovation is pro-cyclical, it is countercyclical in terms of the employee-time allocation to innovation activities. Second, the additionality of a one-year treatment is smaller than that of longer treatments, or repeate program participation. Firms receiving public support during the recession have assigned more employee time to innovation activities than a matched control group, preventing a decline of knowledge capital during the big recession.
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