R&D and subsidies at the firm level: An application of parametric and semi-parametric two step selection models

This paper analyzes the effect of public r&d subsidies on firms' private r&d investment per employee and new product sales in german manufacturing. Parametric and semiparametric two-step selection models are applied to this evaluation problem. The results show that the average treatment effect on the treated firms' r&d intensity is positive. The estimated effects are robust with respect to the different selection models. Further results show that publicly induced r&d spending is as productive as private r&d investment in generating new product sales.