R&D subsidies and productivity in SMEs
Karhunen, H., & Huovari, J. (2015). R&D subsidies and productivity in SMEs. Small Business Economics, 45 (4), 805-823. doi:10.1007/s11187-015-9658-9
Published inSmall Business Economics
© Springer Science+Business Media New York 2015. This is a final draft version of an article whose final and definitive form has been published by Springer. Published in this repository with the kind permission of the publisher.
This paper examines the effect of R&D subsidies on labour productivity. We use firm-level data on Finnish SMEs from 2000 to 2012 and apply a combined matching and difference-in-differences method to control for selection bias. We find no significant positive effect on labour productivity over the five-year period after a subsidy is granted. However, the results vary over time and indicate a 2–4 % negative effect on SMEs’ annual productivity growth one to 2 years after the subsidy year. Nevertheless, subsidies generate a positive employment effect and enhance firm survival. Additional scrutiny reveals that subsidies positively affect the human capital level of low-skill firms.
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