The impact of R&D subsidies on firm innovation

This paper evaluates the impact of an R&D subsidy program implemented in a region of northern Italy in the early 2000s on innovation by beneficiary firms. We use a regression discontinuity design strategy to assess the effect of the grants on the number of patent applications and the likelihood of submissions by subsidized firms. We find that the program had a significant impact on the number of patent applications, more markedly in the case of smaller firms. Our results also show that the program was successful in increasing the likelihood of applying for a patent, but only for smaller firms. Our estimates show that one additional patent application requires grants of between €206,000 and €310,000 to the firms.