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Subsidy Entrepreneurs: an Inquiry into Firms Seeking Public Grants

Author

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  • Anders Gustafsson

    (Örebro University & the Research Institute of Industrial Economics (IFN))

  • Patrik Gustavsson Tingvall

    (Stockholm School of Economics & National Board of Trade Sweden)

  • Daniel Halvarsson

    (The Ratio Institute)

Abstract

This paper studies the incentives and characteristics of firms that apply for, and eventually receive, one or multiple governmental grants intended to stimulate innovation and growth. The analysis departs from a contest model in which entrepreneurs are free to allocate their effort between production and seeking grants. The results suggest that highly productive entrepreneurs abstain from seeking grants, moderately productive firms allocate a share of their effort to grant seeking, and low-productivity firms allocate most resources to seeking grants. Due to their efforts in seeking grants, these low-productive subsidy entrepreneurs also have a relatively high probability of receiving the grants. Using comprehensive data over grants from the three largest grant-distributing agencies in Sweden, we find concordant evidence of a negative relation between the probability of receiving a grant and firm productivity. As we go from single- to multiple-grant-supported firms, this negative relation becomes more pronounced.

Suggested Citation

  • Anders Gustafsson & Patrik Gustavsson Tingvall & Daniel Halvarsson, 2020. "Subsidy Entrepreneurs: an Inquiry into Firms Seeking Public Grants," Journal of Industry, Competition and Trade, Springer, vol. 20(3), pages 439-478, September.
    • Handle: RePEc:kap:jincot:v:20:y:2020:i:3:d:10.1007_s10842-019-00317-0
    DOI: 10.1007/s10842-019-00317-0
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    9. Yang, Kexin & Zhang, Qi & Liu, Qiqi & Liu, Jiangfeng & Jiao, Jie, 2024. "Effect mechanism and efficiency evaluation of financial support on technological innovation in the new energy vehicles’ industrial chain," Energy, Elsevier, vol. 293(C).
    10. Niklas Elert & Magnus Henrekson, 2022. "Collaborative Innovation Blocs and Mission-Oriented Innovation Policy: An Ecosystem Perspective," International Studies in Entrepreneurship, in: Karl Wennberg & Christian Sandström (ed.), Questioning the Entrepreneurial State, pages 345-367, Springer.
    11. Russell S. Sobel & Gary A. Wagner & Peter T. Calcagno, 2024. "The political economy of state economic development incentives: A case of rent extraction," Economics and Politics, Wiley Blackwell, vol. 36(1), pages 104-151, March.
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    13. Bergh, Andreas & Wernberg, Joakim, 2024. "Stress-Testing a Quasi-Market: Unintended Consequences of the Swedish School Voucher System," Working Paper Series 1505, Research Institute of Industrial Economics.
    14. Audretsch, David B. & Belitski, Maksim & Scarra, Deepa, 2024. "Intrapreneurship activity and access to finance in natural science: Evidence from the UK academic spinoffs," Technovation, Elsevier, vol. 129(C).
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    16. Magnus Henrekson & Christian Sandström & Mikael Stenkula, 2024. "Seven reasons why mission‐oriented innovation policies seldom work in practice," Economic Affairs, Wiley Blackwell, vol. 44(2), pages 354-362, June.
    17. Jarle Aarstad & Stig-Erik Jakobsen & Arnt Fløysand & Olav Andreas Kvitastein, 2024. "Governmental Revenue Compensation during COVID-19: Did Firm Resources and Institutional Factors Explain Who Received It?," Tourism and Hospitality, MDPI, vol. 5(3), pages 1-14, August.
    18. Ferraro, Simona & Männasoo, Kadri & Tasane, Helery, 2023. "How the EU Cohesion Policy targeted at R&D and innovation impacts the productivity, employment and exports of SMEs in Estonia," Evaluation and Program Planning, Elsevier, vol. 97(C).
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    20. Špetlík Václav & Čadil Jan, 2023. "When Daces Bite Deeper than Sharks – Does the SMEs Public Subsidy Dose Matter?," Review of Economic Perspectives, Sciendo, vol. 23(4), pages 233-250, December.
    21. Edeh, Jude N. & Acedo, Francisco J., 2021. "External supports, innovation efforts and productivity: Estimation of a CDM model for small firms in developing countries," Technological Forecasting and Social Change, Elsevier, vol. 173(C).

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    More about this item

    Keywords

    Firm subsidies; Industrial policy; Innovation policy; Entrepreneurship;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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