Does Public R&D Support Increase Firm Performance? A Review of Theoretical and Empirical Literature

Themenvorschlag für Bachelorarbeit / Themenvorschlag für Masterarbeit

Policy-makers have a high interest in the ramifications of public R&D support. What effect does public funding have on different measures for firm performance such as growth, innovation activity or revenues? For example, public R&D funding can be stimulating and directly foster innovation, which is born out of the existence of market failures associated with R&D (Arrow, 1962). However, counter-effects such as a crowding out of private investments can outweigh the positive impact of public support. Classical analysis dating back to M. Keynes (Spencer and Yohe, 1970) suggests that by increasing the demand of R&D and hence its price, private investments are substituted by public ones. Other scholars argue that public funding acts as an endorsement of a company as being of high quality and hence can influence firm performance. Indirect effects are more subtle and the cumulative effect might be off either a positive or a negative sign.

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