Allocation of R&D Grants in the Business Sector

19 Pages Posted: 24 Nov 2018 Last revised: 15 Jul 2020

See all articles by Martin Falk

Martin Falk

Independent

Roger Svensson

Research Institute of Industrial Economics (IFN)

Date Written: September 30, 2018

Abstract

The aim of this paper is to provide new empirical evidence on the most crucial determinants of success for firms applying for public R&D grants. Previous studies have been limited to firm level data and mainly tested how firm characteristics affect the allocation of R&D grants. Thereby, they cannot differentiate between firms that have applied for grants but been rejected and firms that did not apply at all. Our contribution is that we use a detailed database of accepted and rejected R&D applications and also introduce several measures of quality indicators of R&D project applications. The estimates show that R&D projects that are assessed with good or very good ratings are significantly more likely to receive approval; particularly for innovative content and novelty as well as to expected additional impacts on R&D activities. In contrast to previous studies, most firm-level characteristics (R&D intensity, labor productivity, cash flow, industry affiliation) are not relevant, indicating that the R&D funding agency does not discriminate among different types of firms. Consequently, applicant firms should focus on radical, new and innovative ideas in their applications rather than on minor improvements.

Keywords: Government R&D-Funding, Business Sector, Evaluation Criteria

JEL Classification: H25, O32, O38

Suggested Citation

Falk, Martin and Svensson, Roger, Allocation of R&D Grants in the Business Sector (September 30, 2018). IFN Working Paper No. 1231, 2018, Available at SSRN: https://ssrn.com/abstract=3275483 or http://dx.doi.org/10.2139/ssrn.3275483

Martin Falk

Independent ( email )

Roger Svensson (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

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