R&D policy instrument mix sequencing: evaluating the impact of receiving R&D grants and R&D tax credits over time on firm-level R&D. Industry and Innovation

Helena Lenihan*, Kevin Mulligan, Mauricio Perez-Alaniz, Christian Rammer

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)
6 Downloads (Pure)

Abstract

The R&D policy instrument mix concept has become increasingly important for understanding how public R&D support drives firm-level R&D. To-date, empirical studies have conceptualised the R&D policy instrument mix as a static unit, whereby firms receive different R&D policy instruments at one point in time. However, firms can also receive different instruments in a sequence, over time. While potential sequencing effects are well rehearsed theoretically, this issue remains a major gap in the empirical literature. Our study evaluates, for the first time, how R&D policy instrument mix sequencing impacts firm-level R&D. We construct a unique dataset, comprising 8,556 unique firms, and 36,136 firm-year observations, over a 17-year period for Ireland. Our analysis focuses on two different R&D policy instruments (R&D grants and R&D tax credits) pursuing the same policy objective. We develop a novel approach to measure R&D policy instrument mix sequencing, focusing on the R&D policy instruments firms receive over a four-year time window. We implement this approach using a multi-treatment panel-data matching approach, which addresses issues of selection bias. Our results suggest that R&D policy instrument mix sequencing is highly effective at driving firm-level R&D, and that some sequences are more effective than others. These findings highlight opportunities to realise superior policy outcomes through targeted sequencing.
Original languageEnglish
Number of pages34
JournalIndustry and Innovation
Early online date21 Aug 2024
DOIs
Publication statusEarly online date - 21 Aug 2024

Keywords

  • instrument mix sequencing
  • R&D grants
  • R&D tax credits
  • Ireland

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