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Leveraging unique microdata to study the effects of public support for business R&D

Governments use public funds to subsidize business research and development (R&D), because externalities and information asymmetries that are inherent to the innovation process make private funding of these activities fall short of what is socially desirable. Yet for these subsidies to have the desired effects, they have to stimulate additional R&D activity in the supported firms and they have to generate positive externalities through knowledge spillovers. The purpose of this project is to fill gaps in empirical research on these topics using state-of-the-art econometrics and unique micro data. More specifically, we aim at bringing new evidence on whether the subsidies lead to additional R&D activity in firms using the regression discontinuity approach, bridging the gap between aggregate cross-country studies and firm-level country-specific studies on the effects of R&D tax incentives and studying a so far unexplored mechanism of knowledge spillovers through firm-to-firm supplier-buyer links.

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