Market failures and the additionality effects of public support to private R&D : Theory and empirical implications

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Title: Market failures and the additionality effects of public support to private R&D : Theory and empirical implications
ISBN: 978-952-462-001-7
Author: Takalo, Tuomas ; Tanayama, Tanja ; Toivanen, Otto
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2013
Series number: 2/2013
Year of publication: 2013
Publication date: 13.2.2013
Published in: Published in International Journal of Industrial Organization, Volume 31, Issue 5, September 2013, Pages 634–642
DOI: 10.1016/j.ijindorg.2013.02.002
Pages: 43 s.
Keywords: R&D; valtiontuki; rahoitus; yritykset; kustannukset; mallit; tukipalkkiot; innovaatiot;
JEL: O38; O31; L32; H25; G28
Abstract: 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
Rights: https://helda.helsinki.fi/bof/copyright


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