Market failures and the additionality effects of public support to private R&D : Theory and empirical implications
Takalo, Tuomas; Tanayama, Tanja; Toivanen, Otto (13.02.2013)
Numero
2/2013Julkaisija
Bank of Finland
2013
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-20140807448Tiivistelmä
We extend the theoretical basis of the empirical literature on the effects of R&D subsidies by providing an estimable model of strategic interaction among subsidy applicants, and public and private sector R&D financiers. Our model incorporates fixed R&D costs and a cost of external finance. We derive the optimal support rule. At the intensive (extensive) margin the costs of external funding reduce (increase) the optimal subsidy rate. We also establish necessary and sufficient conditions for the existence of additionality. It turns out that additionality at the intensive margin is less likely with large spillovers. Our results suggest that the relationship between additionality and welfare may not be straightforward. Keywords: R&D, entrepreneurial finance, R&D subsidies, innovation policy JEL classification numbers: O38, O31, L32, H25, G28
Julkaisuhuomautus
Published in International Journal of Industrial Organization, Volume 31, Issue 5, September 2013, Pages 634–642