Input Additionality Effects of R&D Subsidies in Austria. Empirical Evidence from Firm-level Panel Data

In this paper we study the question of the leverage effect of public subsidies to private R&D: do public contributions to private R&D boost total R&D expenditures – and if so, do they boost them by an amount which is larger than the amount of public money which was used in this way? The paper is based on firm-level data from the Austrian Industrial Research Promotion Fund (FFF) which occupies a central role in the promotion of industrial research in Austria. The results of the panel regression suggest that the public subsidies of private R&D have a crowding-in effect of about 40 percent; 1 additional euro of funding induces firms to contribute an additional 0,40 € of their own money. Both very small and large firms seem to exhibit higher leverage, small and medium-sized firms smaller leverage. Additionally, the leverage estimates for firms that perform R&D only occasionally are higher than for regular R&D performers.