Do Incentives to Industrial R&D Enhance Research Productivity and Firm Growth? Evidence from the Italian Case

This paper aims at contributing to the empirical literature about the impact of R&D subsidies on firm performances by providing recent micro-evidence from Italy. We focus on the last years of the Special Fund for Applied Research (FSRA), the main instrument of industrial research and innovation policy in Italy until 2000, and evaluate its effects on several dimensions of firm performance adopting a counterfactual approach. We controlled for the potential selection bias of public subsidies by combining a non parametric matching procedure with an auxiliary regression in order to account for systematic bias. Results show that the innovative performance improves only temporarily, and no significant differences between grant recipients and non-recipients emerge as far as labour productivity and sales growth are concerned. This evidence suggests that, in our sample of firms, public R&D subsidies were not able to produce any effect in the medium run on any of the outcome variables considered, casting some doubts on the overall efficacy of the public instrument.