Do government R&D subsidies stimulate collaboration initiatives in private firms?

Input-driven policy is typically designed to support R&D and contribute to the enhancement of innovation competences in individual firms. However, it is not clear whether this ‘more is better’ approach has contributed to the establishment of a vibrant innovation ecosystem by stimulating firms’ inclination to collaborate. The current study investigates this question by analysing the data from 489 Korean innovative manufacturing firms using a propensity score matching analysis. As expected, the link to increased innovation collaborations was statistically significant between the recipients and R&D subsidies. The results show that R&D subsidies stimulate firms to choose partners more adventurously, by going outside the traditional value chains and regional boundaries. However, the impact of subsidies on innovation collaboration followed an inverted U-shaped curve: the impact in highly funded firms was smaller than that in firms that received a more modest amount. This finding suggests that government support encourages firms to work with a heterogeneous range of partners and to develop more diversified ecosystems. Our study suggests that different policy impacts, such as input and behavioural additionality, can occur simultaneously and even influence each other. Thus, there is a strong need for policy makers to develop more sophisticated policy tools for open innovation promotion.