Government policy failure in public support for research and development
Haapanen, M., Lenihan, H., & Mariani, M. (2014). Government policy failure in public support for research and development. Policy studies, 35 (6), 557-575. doi:10.1080/01442872.2014.971728
Julkaistu sarjassaPolicy studies
© 2014 Taylor & Francis. This is an author's final draft version of an article whose final and definitive form has been published by Routledge/Taylor & Francis. Published in this repository with the kind permission of the publisher.
Promoting Research and Development (R&D) and innovative activity is a key element of the EU Lisbon Agenda and is seen as playing a central part in stimulating economic development. In this paper we argue that, even allowing for benevolent policymakers, informational asymmetries can lead to a misallocation of public support for R&D, hence government policy failure, with the potential to exacerbate pre-existing market failures. Initially, we explore alternative allocation mechanisms for public support, which can help to minimize the scale of these government policy failures. Of these mechanisms (grants, tax credits, or allocation rules based on past performance), our results suggest that none is universally most efficient. Rather, the effectiveness of each allocation rule depends on the severity of financial constraints and on the level of innovative capabilities of the firms themselves.