DO R&D SUBSIDIES SUPPORT INNOVATION OR IMITATION? EVIDENCE FROM FOUR EU COUNTRIES

This paper presents an empirical analysis of the effects of public R&D subsidies on the innovative activities of private firms in Bulgaria, the Czech Republic, Germany, and Portugal. We investigate whether public R&D subsidies make firms’ activities more innovative. We measure these effects using firm-level data from the 2010 and 2012 Community Innovation Survey and estimated the effects by propensity score matching. We find that the subsidies do not fully crowd out private sources of R&D expenditure in any of these countries. However, there is a substantial heterogeneity in the impact of the subsidies on firms’ innovativeness. R&D subsidies do support true innovations in the Czech Republic and Germany, but they enhance only imitations in Bulgaria and Portugal.