Young Firms and R&D subsidies in Catalonia

Based on four different public R&D calls from the Catalan government, this article evaluates the propensity of entrants and young firms to apply for R&D public grants and, as compared to their counterparts, their capacity for obtaining subsides. This analysis is particularly relevant since entrants and young firms encounter greater market difficulties. Our sample contains 22,139 firms and corresponds to a merge of two databases: one from the Catalan agency responsible for promoting private innovation (ACC1Ó) and the other from the Mercantile Register. Merging these databases has two advantages. Firstly, participants and non-participants in the public R&D call (“InnoEmpresa†) are included and, secondly, it provides us with information at firm and project level. The period of observation is between 2006 and 2010, since some explanatory variables are lagged by one period. We apply a two-step methodology. Our results show that entrants and young firms show a lower propensity to apply for R&D subsidies and to obtain R&D public grants. Firm size, exports and participation in a previous call show a positive impact on the likelihood of applying, and firms located in the Barcelona metropolitan area have a greater propensity to apply. Additionally, project quality and R&D cooperative reports presented jointly with other partners have a positive impact on the likelihood of obtaining the R&D subsidy. Finally, firms that have previously obtained an R&D subsidy do not exhibit a greater propensity for obtaining subsequent grants. Keywords: R&D subsidies, entrants and young firms Classification JEL: L53, L25, O38