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