The Effect of Government Research Grants on Firm Innovation: Theory and Evidence from Austria

Hauptveranstaltung: Vortragsreihe "WIFO-Extern"
Personen: Rainer Widmann
Sprache: Deutsch
Österreichisches Institut für Wirtschaftsforschung
This paper examines the effect of government research grants on firms' patenting outcomes. Discontinuities in the funding decisions of the Austrian Research Promotion Agency (FFG) allow to study the effect of public funding in a large sample of Austrian firms. My estimates suggest that a government research grant increases the propensity to file a patent application with the European Patent Office within 4 years by around 10 percentage points. Stronger effects appear for established firms of advanced age. I present evidence that established firms undertake ambitious research projects when they receive grants. Finally, I interpret the findings in an "exploration vs. exploitation" model in which the government agency addresses inefficiency in the direction of research.