Participation inertia in R&D tax incentive and subsidy programs Articles uri icon

publication date

  • January 2017

start page

  • 153

end page

  • 177


  • 1


  • 12

International Standard Serial Number (ISSN)

  • 0921-898X

Electronic International Standard Serial Number (EISSN)

  • 1573-0913


  • We examine how persistent firms' participation is in R&D subsidy and tax incentive programs, and whether persistence is driven by individual heterogeneity-observed and unobserved-or by state dependence. Using a panel of Spanish manufacturing firms over the period 2001-2008, we estimate a set of dynamic models of program participation. True state dependence of participation in each program is found to be significant, while unobserved heterogeneity accounts for about 41 and 29 % of observed persistence in subsidy and tax credit programs, respectively. Both tend to reach mostly stable R&D performers. We also identify significant differences across programs. Highly productive firms within a given industry are more likely to obtain subsidies; the use of tax credits, in contrast, is unrelated to a firm's productivity. Our results suggest that R&D tax incentives and R&D subsidies are not substitutes and that any unintended misallocation of support is likely to persist.


  • dielectric rod waveguide (drw); drw antenna; drw antenna array; millimeter wave; terahertz; thz antenna; photomixer r&d; innovation policy; tax incentives; subsidies; persistence; additionality; dynamic probit; initial conditions problem; meta-regression analysis; development collaboration; development performance; public subsidies; innovation; firms; persistence; investment; credits