The Effects of R&D Subsidies to Small and Medium-Sized Enterprises. Evidence from a Regional Program

Abstract

This article evaluates a small-business program implemented in an Italian region, Tuscany, providing small and medium-sized firms with R&D subsidies. To establish whether the subsidy has encouraged non-transitory R&D, enhanced the propensity to intellectual property protection and to collaborative R&D with other firms or research centers, or improved firm performance in general, we estimate a number of potential input, output and behavioral effects that the program might have induced shortly after the completion of the subsidized project. In order to do so, we perform a careful application of matching techniques, using a wide set of pre-subsidy characteristics. We find that the program has been ineffective with respect to the innovation and commercial outputs of small and medium-sized firms, but has encouraged a non-transitory practice of R&D by former non-R&D-performers and contributed to firm upskilling, which may be seen as prerequisites for the creation or the consolidation of absorptive capacity.