Linking public support, R&D, innovation and productivity: New evidence from the Spanish food industry

•We model the relationship R&D-innovation-productivity in the food industry.•National public support is crucial for companies to engage in R&D activities.•Low marginal effect of R&D to produce innovation outputs.•Innovation output influences productivity with an elasticity of 0.29.•Process innovation is not relevant in explaining productivity.

This research provides novel empirical evidence of the relationship between public support for R&D, firms' R&D expenditure, innovation and productivity in the Food and Beverage (F&B) industry. The empirical framework relies on a modified version of the Crépon-Duguet-Mairesse (CDM) model, applied to a sample of 541 Spanish firms over the years from 2008 to 2011 (1910 observations). The first step in our model shows a great impact of public funding; firms receiving national funds invested 54% more in R&D than firms without this type of public support. The share of workers with a degree, and cooperation among firms are also relevant for engaging in R&D in the F&B industry. The second step points out the significant role of R&D expenditure for product and organizational innovation, while we did not find any significant effect for process innovation. The final step reveals that innovation output influences productivity with an elasticity of 0.29 for the innovation variable. Other significant factors affecting labour productivity are the size of the company, investment intensity, international competition, and having foreign participation of over 50% in the company.