Do Public R&D Subsidies Foster Innovation? : Evidence from Finnish Patent Data

Show simple item record

dc.contributor Helsingin yliopisto, Valtiotieteellinen tiedekunta, Politiikan ja talouden tutkimuksen laitos fi
dc.contributor University of Helsinki, Faculty of Social Sciences, Department of Political and Economic Studies en
dc.contributor Helsingfors universitet, Statsvetenskapliga fakulteten, Institutionen för politik och ekonomi sv
dc.contributor.author Louhivuori, Valtter
dc.date.issued 2013
dc.identifier.uri URN:NBN:fi:hulib-201703272581
dc.identifier.uri http://hdl.handle.net/10138/41834
dc.description.abstract Innovations can be seen as an engine of long-term economic growth. Firms conduct research and development (R&D) activities to create new production technology, methods or products in order to rival their competitors. In addition to benefiting the inventor, new innovations have considerable positive externalities through knowledge spillovers. However, the socially optimal level of innovations may not be achieved, because firms can underinvest in R&D if they are not compensated for the positive externalities produced by their R&D activities. Public R&D programs aim to encourage innovation by compensating firms for the positive externalities that they produce. Finland’s recent public efforts on fostering innovation have been globally high by many indicators. Nevertheless, the effectiveness of these efforts has been relatively little scrutinised. This thesis studies the effectiveness of Finnish R&D program in fostering innovation outputs at the firm level. Firm-level patent statistics are used as a proxy for the innovativeness of a firm. A major contribution of this thesis is the comprehensive database that has been constructed and employed for the analysis. The database includes firm-level innovative characteristics for all the Finnish firms during a ten-year sample period, altogether covering more than two million observations for over 400 000 firms. Most of the studies on the effectiveness of the Finnish R&D program rely on the assumption that the researcher has full information on the relevant innovative characteristics that affect a firm’s program eligibility. This thesis addresses the program selectivity concern by employing an instrumental variable approach that exploits regional variation in public R&D funding stemming from the European Regional Development Fund (ERDF) aid regulations. The estimates suggest that when the program selection bias is neglected, program participation is associated with around 10 percentage point increase in patenting probability among active patentees, whereas for all firms, the increase in patenting probability is only around 0.1 percentage points. However, the instrumental variable estimates do not confirm any significant causal effect of R&D program on patenting. This thesis highlights the importance of accounting for the selection bias induced by the R&D program selection criteria. The public R&D agency is found to select firms strongly based on the same characteristics that are highly associated with innovation within firms. Therefore, it is important to ask if some of the supported firms might have had conducted their R&D projects even in the absence of the public support. Analysing the R&D program’s selection criteria plays a major role in scrutinising the effectiveness of public R&D subsidies and in the further development of public innovation policies. en
dc.language.iso eng
dc.publisher Helsingfors universitet sv
dc.publisher University of Helsinki en
dc.publisher Helsingin yliopisto fi
dc.subject innovations en
dc.subject research and development en
dc.subject patents en
dc.subject subsidies en
dc.title Do Public R&D Subsidies Foster Innovation? : Evidence from Finnish Patent Data en
dc.type.ontasot pro gradu-avhandlingar sv
dc.type.ontasot pro gradu -tutkielmat fi
dc.type.ontasot master's thesis en
dc.subject.discipline Economics en
dc.subject.discipline Taloustiede fi
dc.subject.discipline Ekonomi sv
dct.identifier.urn URN:NBN:fi:hulib-201703272581

Files in this item

Total number of downloads: Loading...

Files Size Format View
Thesis Valtter Louhivuori.pdf 3.723Mb PDF View/Open

This item appears in the following Collection(s)

Show simple item record