Knowledge spillovers from subsidized R&D and the productivity of non-subsidized firms

(with C. Lopes-Bento)

Innovation policy encourages firms’ participation in co-funding schemes for R&D projects. Yet, the distribution of awarded grants tends to be highly skewed with few firms receiveing the lion’s share of the public money. From a welfare perspective, supporting a small number of selected firms can be an efficient policy provided that the subsidies trigger knowledge spillover generating R&D in the subsidized firms. This study investigates whether the effect of subsidies go beyond the subsidized firms by affecting productivity of non-subsidized ones. We find that research subsidies affect productivity of non-subsidied positivly, while development subsidies do not. Dynamic model specifications further show that in the longer run, development subsidies lead to business stealing by promoting product and process development in the subsizied firms with little positive spillovers to the non-recipients. When distinguing R&D-active and non-R&D-active firms among the non-subsidized firms, we see that adverse competitive effects are stronger for the latter. Conducting own R&D may therefore increase firms’ ability to realize effective knowledge spillovers and to avoid being harmed by competitive pressure from other firms product or process innovations.  


R&D Subsidies and Firms’ Cost of Debt

(with S. Demeulemeester)

Financing research and development (R&D) through loans is usually a costly endeavor. Information asymmetry, outcome uncertainty and low collateral value tend to increase the cost of debt. Based on a large panel of firms, this study shows that recipients of public R&D grants, on average, face lower costs of debt. Immediate effects on cost of debt suggest that a process of certification in which the subsidy signals the quality of the firm’s R&D to external lenders explains this observation. In addition, longer-term effects from an R&D grant receipt may point to a resource effect that facilitates investment in R&D such as prototyping and therefore provide tangible outcomes that may inform lenders on the firms R&D quality. The comparison between young ventures and established firms, however, shows that for the former short-term effects prevail primarily for subsidies for basic research. At a stage where outcome uncertainty and information asymmetries are particularly high, basic research grants may signal quality of more radical R&D endeavors. Young ventures also experience a longer-term impact from subsidies for development projects, which could point to funding of prototyping.  


What’s behind Multiple Institutional Affiliations in Academia?

(with C. Lawson)

Multiple institutional affiliations occur when an academic belongs to more than one organisation. Recent research has indicated an increase in multiple affiliations, but evidence on roles and motivations is mainly anecdotal. We argue that multiple affiliations may present a new model for competitive edge in the highly contested research market. Reporting results from an international survey on academics in three major science nations (the UK, Germany and Japan), we find that multiple affiliations are widespread across disciplines and are used to increase access to resources, networks or know-how. Junior academics also use them to increase job prospects and income, indicative of the precarious employment conditions they may find themselves in. Additional affiliations do not seem to be a source of conflict for mid-career and senior researchers, but junior researchers may face time and other work-related conflicts due to the additional commitment. The majority of additional affiliations build on personal contacts, but institutions may become more proactive in shaping the organisational links of their staff in future, with consequences for the organisation of science.