Returns to public R&D grants and subsidies

Arbeitspapier

We address the question of whether the returns to R&D differ between R&D projects funded by public grants and R&D in general. To answer this question, we use a flexible production function that distinguishes between different types of R&D by source of finance. Our approach requires no adjustment of the sample or data in order to include firms that never invest in R&D, in contrast to the standard Cobb-Douglas production specification. We investigate the productivity and profitability effects of R&D using a comprehensive panel of Norwegian firms over the period 2001-2009. The results suggest that the returns to R&D projects subsidized by the Research Council of Norway do not differ significantly from R&D spending in general. Our estimate of the average rate of return to R&D is about 10 percent. This estimate is robust with respect to whether firms with zero R&D are included in the estimation sample or not. In contrast, using a standard Cobb-Douglas specification and restricting the sample of firms to those with positive R&D, leads to implausibly high estimates of the rate of returns.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Papers ; No. 740

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; Model Evaluation, Validation, and Selection ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; Technological Change: Government Policy
• Subject: Returns to R&D ; Public grants ; Public subsidies ; Productivity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cappelen, Ådne ; Raknerud, Arvid ; Rybalka, Marina
• Event: Veröffentlichung
• (who): Statistics Norway, Research Department
• (where): Oslo
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/192722
• Last update: 10.03.2025, 11:43 AM CET