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Impact and complementarity of public support to business funded R%D: the importance of policy-mix and policy stability

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  • Celeste Varum
  • Miguel Viegas

Abstract

Investment in R%D is established as an important factor to economic growth and governments aim to encourage the national level of R%D using different policy instruments. The purpose of this paper is to obtain new evidence about a fundamental question of empirical studies on innovation policy. Does public spending on R%D contributes to increase private finance to R%D, that is, it has an additionality effect, or alternatively it substitutes the private investment? This study contributes to this debate, analysing the impact of different forms of public funding to R%D on R%D performed and financed by the private sector. Doing so we add to previous research by exploring how the policy-mix and instability are likely to influence the effectiveness of the instruments. This work applies the Arellano-Bond difference GMM estimator to analyse the impact of public support as a stimulus to private funded R%D in 16 OECD countries over 27 years (1981 to 2008), being unique in this respect. After studying the results of a baseline model, we extend the analysis in order to explore successively, the existence of non-linear effects, the effects of the instability of the instruments over time, and the interaction between the various incentive instruments.

Suggested Citation

  • Celeste Varum & Miguel Viegas, 2015. "Impact and complementarity of public support to business funded R%D: the importance of policy-mix and policy stability," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 17(4), pages 430-444.
    • Handle: RePEc:ids:gbusec:v:17:y:2015:i:4:p:430-444
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