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The “sugar rush” from innovation subsidies: a robust political economy perspective
Jönköping University, Jönköping International Business School, JIBS, Economics. The Ratio Institute, Stockholm, Sweden.ORCID iD: 0000-0002-9173-8347
Jönköping University, Jönköping International Business School, JIBS, Economics. Jönköping University, Jönköping International Business School, JIBS, Center for Family Enterprise and Ownership (CeFEO). The Ratio Institute, Stockholm, Sweden.ORCID iD: 0000-0001-5776-9396
Stockholm School of Economics, Stockholm, Sweden.
The Ratio Institute, Stockholm, Sweden.
2016 (English)In: Empirica, ISSN 0340-8744, E-ISSN 1573-6911, Vol. 43, no 4, 729-756 p.Article in journal (Refereed) PublishedText
Abstract [en]

The governments of most advanced countries offer some type of financial subsidy to encourage firm innovation and productivity. This paper analyzes the effects of innovation subsidies using a unique Swedish database that contains firm level data for the period 1997–2011, specifically informa tion on firm subsidies over a broad range of programs. Applying causal treatment effect analysis based on matching and a diff-in-diff approach combined with a qualitative case study of Swedish innovation subsidy programs, we test whether such subsidies have positive effects on firm performance. Our results indicate a lack of positive performance effects in the long run for the majority of firms, albeit there are positive short-run effects on human capital investments and also positive short-term productivity effects for the smallest firms. These findings are interpreted from a robust political economy perspective that reveals that the problems of acquiring correct information and designing appropriate incentives are so complex that the absence of significant positive long-run effects on firm performance for the majority of firms is not surprising.

Place, publisher, year, edition, pages
Springer, 2016. Vol. 43, no 4, 729-756 p.
Keyword [en]
Causal treatment effect evaluation, CEM, Firm performance, Innovation subsidies, Market failures, Robust political economy
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-31189DOI: 10.1007/s10663-016-9350-6ScopusID: 2-s2.0-84978160697OAI: oai:DiVA.org:hj-31189DiVA: diva2:951492
Available from: 2016-08-09 Created: 2016-08-09 Last updated: 2016-10-18Bibliographically approved

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Gustafsson, AndersStephan, Andreas
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