Our next event for the Early Career Scholar Seminar Series (ECSSS) will be tomorrow! On Friday, December 17, 2021, at 12:00-1:00 (ET).
Leo Lu will be presenting his work on R&D Input Additionalities of Government Innovation Subsidies: Investigating the Moderating Roles of Absorptive Capacity and Financial Constraints.
The impact of government innovation subsidies on private R&D input has been investigated extensively in current literature. Yet, the results are inconclusive. Moreover, research that explores how firm resources and competencies influence the additionalities of government subsidies is scarce. In this paper, we investigate the input additionalities of government innovation subsidies using a unique dataset of a Canadian regional innovation subsidy program – The Atlantic Canada Opportunity Agency (ACOA) Innovation subsidies. We found that, in general, government subsidies stimulate private R&D input in terms of the amount of R&D investment, the number of R&D employees hired, and the amount of R&D employee wages paid. We also found that the positive additionalities are strengthened when a firm has more cash slack on hand, and when the firm has a higher absorptive capacity in R&D. We also found that high-tech firms invest more in private R&D than low-tech firms when they receive government subsidies. However, the R&D investment is used to pay a higher wage to key R&D employees rather than creating additional R&D job opportunities for high-tech firms. Our findings provide important guidance to policymakers in terms of to whom and how government subsidies should be allocated.
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Looking forward to see you at the event.