The firm-level innovation impact of public R&D funding: Evidence from the German renewable energy sector

Drawing on a resource-based view (RBV), this paper analyzes the effect of public R&D funding as a financial resource on firm-level R&D performance. The panel regression analysis focuses on the German renewable energy sector and is based on 206 publicly granted R&D projects with a volume of 235 Mio €, approx. 3900 patents and 8500 patent citation data for 1448 firms. It verifies a significant positive effect of public R&D funding in terms of absolute monetary value and past funding intensity on the number of patents, but no significant effect on patent's quality measured by the number of citations. Besides public R&D funding, a firm's technology knowledge base and the overall financial situation have a positive effect on the quantity of patents, while the effect of firm's age is negative. The paper contributes to the RBV by linking it with extant research on firm innovation, gaining empirical insights on the importance of financial, physical and intangible resources. The paper encourages innovation managers to apply for public R&D funding and invest constantly in a firm's technology knowledge base.