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Impact evaluation of business development grants on SME performance

Author

Listed:
  • Stjepan Srhoj

    (University of Dubrovnik)

  • Michal Lapinski

    (Johannes Kepler University Linz)

  • Janette Walde

    (University of Innsbruck)

Abstract

An assessment of the economic impact that can be achieved through grants makes it possible to refine such policy instruments in order to make public funding more effective in relation to the objectives pursued. In this paper, we investigate the effects of a business development grant scheme. More specifically, we question whether firms’ performance measures increased after receiving such grants. Methodically, we match grant receiving firms with grant non-receivers and estimate the average treatment effect on the treated using a two-way fixed effects regression. Our results point towards a positive effect of the grant scheme, which is particularly evident for firms of smaller size. Our estimated dose-response functions show that the share of grant amount in firm profits needs to be high enough for the grants to be effective. According to back-of-the envelope analysis, benefits outweigh the direct scheme costs.

Suggested Citation

  • Stjepan Srhoj & Michal Lapinski & Janette Walde, 2021. "Impact evaluation of business development grants on SME performance," Small Business Economics, Springer, vol. 57(3), pages 1285-1301, October.
    • Handle: RePEc:kap:sbusec:v:57:y:2021:i:3:d:10.1007_s11187-020-00348-6
    DOI: 10.1007/s11187-020-00348-6
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    3. Peter Grajzl & Stjepan Srhoj & Jaka Cepec & Barbara Mörec, 2024. "A by-product of big government: the attenuating role of public procurement for the effectiveness of grants-based entrepreneurship policy," Small Business Economics, Springer, vol. 62(3), pages 895-916, March.
    4. Hyensup Shim & Kiyoon Shin, 2021. "Empirical Analysis of Evidence-Based Policymaking in R&D Programmes," Sustainability, MDPI, vol. 14(1), pages 1-15, December.
    5. Stjepan Srhoj & Melko Dragojević, 2024. "Public Procurement and Supplier Job Creation: Insights from Auctions," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 40(2), pages 470-527.
    6. Srhoj, Stjepan & Kovač, Dejan & Shapiro, Jacob N. & Filer, Randall K., 2023. "The impact of delay: Evidence from formal out-of-court restructuring," Journal of Corporate Finance, Elsevier, vol. 78(C).
    7. Stjepan Srhoj & Bruno Škrinjarić & Sonja Radas & Janette Walde, 2022. "Small matching grants for women entrepreneurs: lessons from the past recession," Small Business Economics, Springer, vol. 59(1), pages 117-142, June.
    8. Eduardo Nakasone & Maria Porter & Mywish K. Maredia & Andrew Jones & David Tschirley, 2024. "A mixed methods assessment of technical and financial assistance to small‐ and medium‐sized enterprises in Kenya's food sector," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 46(2), pages 435-455, June.
    9. Marjan Petreski, 2022. "State Aid Causing Distinct Incentives? Quasi-Experimental Measurement of the Effects of Grants on Private Enterprises in North Macedonia," Evaluation Review, , vol. 46(2), pages 200-230, April.
    10. Sorin-Romulus Berinde & Laura-Maria Herța, 2021. "Performance Improvements for Romanian SMEs and Their Predictors," Sustainability, MDPI, vol. 13(15), pages 1-13, July.
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    More about this item

    Keywords

    Business development grants; Policy evaluation; Two-way fixed effects regression; Matching; Heterogeneous treatment effects; Dose-response-function;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • G01 - Financial Economics - - General - - - Financial Crises
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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