Business subsidies in Finland: the dynamics of application and acceptance stages

Heli Koski, The Research institute of Finish Economy

We use a comprehensive database concerning the application and allocation of business subsidies in Finland merged with the firm-level data comprising about 330 000 firms from the year 2004 to 2008. We find strong continuities in participation both within and between the different public support programs. Continuity in the firms’ participation in the same support programs arises largely from the application stage. It seems that the agencies try to curb this path dependence, at least to some extent, by targeting their support to the firms not previously subsidized by the agency. We further find that the firms that have once entered the Finnish subsidy system not only actively seek further support from the same organization but also from the other agencies allocating business subsidies. Furthermore, our estimation results indicate that the agencies tend to favor firms that have previously been subsidized by some other public organization. In line with the previous empirical findings, and against the general public policy aims to target particular support for the SMEs, we find that all agencies favor larger companies. Also, contradictory to the learning hypothesis related to firm age, and on the other hand, supporting public policy lines favoring newly established or start-up companies in subsidy funding decisions, we find that younger firms both are more likely to apply for and to receive subsidies than the older ones.

About the speaker
Heli Koski is affiliated with ETLA, the Research Institute of the Finnish Economy, as the head of the unit of “competition, innovation and productivity” research program. Previously, she has been affiliated with Helsinki School of Economics and the London School of Economics and worked as a special advisor of the EU Commissioner for Enterprise and Information Society, Erkki Liikanen She has published articles in various books and journals such as Review of Economic Research on Copyright Issues, Review of Industrial Organization, Journal of Industry, Competition and Trade, Information Economics and Policy, Economics of Innovation and New Technology and Research Policy. Her current research concentrates into the economic analysis of the entrepreneurial business strategies and innovation, diffusion and usage of new technologies, and to the related technology policy questions.

Venue: UNU-MERIT New student class room (Fourth Floor)

Date: 08 October 2010

Time: 12:00 - 13:00  CEST