The effects of R&D subsidies and publicly performed R&D on business R&D: A survey

This literature review shows that a majority of studies finds complementarity of R&D subsidies and tax credits with private R&D expenditures. A non-negligible minority finds incomplete crowding out. Full crowding out is found only for small parts of the respective samples or small sub-sectors of the economy under consideration. Education R&D and publicly performed R&D stimulate private R&D according to a small literature. We focus on the exceptions from these dominant results. The controversies concern firm size, interaction of policy instruments, and effectiveness of parts of publicly performed R&D. There are important suggestions for future research derived from our literature review: (i) use of dynamic models with adequate time lags, (ii) explaining effects of country and firm heterogeneity.

Keywords: Research & development, business R&D, subsidies, public R&D.

JEL Classification: H25, O38