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The Impact of EU Grants for Research and Innovation on Firms' Performance

Author

Listed:
  • Gabor Katay

    (European Commission, Directorate†General for Economic and Financial Affairs)

  • Palma Filep-Mosberger

    (Magyar Nemzeti Bank (Central Bank of Hungary))

  • Francesco Tucci

    (Sapienza Università di Roma)

Abstract

The paper evaluates the impact of the European Commission's Seventh Framework Programme (FP7) grants on profit-oriented firms' post-treatment performance. Using a quasi-experimental design and a dataset covering applicants from 46 countries, we find that FP7 grants increase firms' sales and labour productivity by about 18%. However, there is no significant impact on employment levels, pointing to potential growth barriers that prevent firms from scaling production despite improved productivity. The effectiveness of these grants varies significantly based on factors such as financial constraints, project risk profiles, market structure, and the innovation environment. Smaller, less productive firms with tighter financial constraints in technologyintensive sectors operating in concentrated markets and favourable innovation environments, particularly those undertaking longer and riskier projects, tend to benefit more.

Suggested Citation

  • Gabor Katay & Palma Filep-Mosberger & Francesco Tucci, 2025. "The Impact of EU Grants for Research and Innovation on Firms' Performance," MNB Working Papers 2025/1, Magyar Nemzeti Bank (Central Bank of Hungary).
    • Handle: RePEc:mnb:wpaper:2025/1
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    File URL: https://www.mnb.hu/en/publications/studies-publications-statistics/working-papers-1-1/wp-2025-1-gabor-katay-palma-filep-mosberger-francesco-tucci-the-impact-of-eu-grants-for-research-and-innovation-on-firms-performance
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    More about this item

    Keywords

    EU funds for research and innovation; firm productivity; regression†discontinuity design.;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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