Dirk Czarnitzki

The Effects of Public R&D Subsidies on Firms' Innovation Activities: The Case of Eastern Germany

This study analyzes the effects of public R&D policy schemes on the innovation activities of firms in Eastern Germany. The main question in this context is whether public funds stimulate R&D activities or simply crowd out privately financed R&D. Empirically, we investigate the average causal effects of all public R&D schemes in Eastern Germany using a nonparametric matching approach. Compared to the case in which no public financial means are provided, it turns out that firms increase their innovation activities by about four percentage points.

Business services in Germany: bridges for innovation

During the last 20 years, R&D and innovation activities in the service sector have clearly increased. In particular, business services are believed to be one of the main drivers of technical changes and economic progress. Looking at the labour indices calculated over the period from 1982 to 1996 one notices a remarkable increase of over 70 per cent for business services. About 8 per cent of total employment in West Germany is in business services. In particular, by taking advantage of information and communication technologies, knowledgeintensive business service firms increasingly play the role of ‘converters’ of technological information within the economy. They are providers, purchasers or partners in the context of innovation. A sound innovation capacity, especially knowledge, creativity, market and management skills, lets them become bridges for innovation.

R&D investment and financing constraints of small and medium-sized firms

This study tests for financial constraints on R&D investment and how they differ from capital investment. To identify constraints in the access to external capital, we employ a credit rating index. Our models show that internal constraints, measured by mark-ups, are more decisive for R&D than for capital investment. For external constraints, we find a monotonic relationship between the level of constriction and firm size for both types of investment. Thus, external constraints turn out to be more binding with decreasing firm size. On the contrary, we do not find such monotonic relationships for internal constraints. Differentiation by firms’ age does not support lower constraints for older firms.

Research and Development in Small and Medium-Sized Enterprises: The Role of Financial Constraints and Public Funding

This paper presents microeconometric evidence on financing constraints for research and development activities in German small- and medium-sized firms (SME). Special attention is paid to the role of public research and development (R&D) subsidies. For this purpose SMEs in West and East Germany are compared because these regions are very different in their supply of public R&D funding. The empirical evidence suggests that West German SMEs are financially constrained in their R&D activities by both internal and external resources. In East Germany, firms are not sensitive to external constraints, possibly due to high public R&D subsidies. The results show that R&D in East Germany is to a large extent driven by public subsidies and that the usual financial market mechanisms are dysfunctional with respect to R&D in this region.

Biomedical Academic Entrepreneurship Through the SBIR Program

This paper considers the U.S. Small Business Innovation research (SBIR) program as a policy fostering academic entrepreneurship. We highlight two main characteristics of the program that make it attractive as an entrepreneurship policy: early-stage financing and scientist involvement in commercialization. Using unique data on NIH supported biomedical researchers, we trace the incidence of biomedical entrepreneurship through SBIR and describe some of the characteristics of these individuals. To explore the importance of early-stage financing and scientist involvement, we complement our individual level data with information on scientist-linked and non-linked SBIR firms. Our results show that the SBIR program is being used as a commercialization channel by academic scientists. Moreover, we find that the firms associated with these scientists perform significantly better than other non-linked SBIR firms in terms of follow-on venture capital funding, SBIR program completion, and patenting.

The Link between R&D Subsidies, R&D Spending and Technological Performance

This paper analyzes the effects of public R&D funding on R&D expenditure and patenting behavior of German firms. The main focus is the direct impact of subsidies on R&D and the indirect effect on innovation output measured by patent applications. We distinguish the productivity of purely privately financed R&D and additional R&D induced by public incentive schemes. For this, a treatment effects analysis is conducted in a first step. The results are implemented into the estimation of a patent production function. It turns out that both purely privately financed R&D and publicly induced R&D show a positive productivity.

Value for Money? New Microeconometric Evidence on Public R&D Grants in Flanders

A significant amount of money is spent on programs to stimulate innovative activities. In this paper, we review the effects of a specific government-sponsored commercial R&D program from various angles. We start by evaluating whether we find positive effects of subsidies on R&D investment and R&D employment. Then, we analyze how the observed effects of subsidies on R&D intensity and employment vary over time, vary if the firm receives also support from other sources, vary depending on how many supported projects a single firm has at the same time or vary if a firm gets support consecutively. Finally, we estimate the macroeconomic impact of these grants in terms of R&D employment. We conclude that (i) the policies are not subject to full crowding out, (ii) the treatments effects are stable over time, (iii) receiving subsidies from other sources in addition to the program under evaluation does not decrease the estimated treatment effect, and (iv) receiving grants repeatedly does not decrease the magnitude of the treatment effects either. Using a back-of-the envelope calculation, we estimate that, on average, five R&D jobs are created (or maintained) per supported project in the Flemish economy.

Patent Protection, Market Uncertainty, and R&D Investment

The real options investment theory shows that greater uncertainty about market revenues reduces current R&D investment by increasing the value of waiting. This paper presents empirical evidence that patent protection mitigates the effect market uncertainty on R&D investment.

Exploring the Relationship Between Scientist Human Capital and Firm Performance: The Case of Biomedical Academic Entrepreneurs in the SBIR Program

There is an emerging debate in the scholarly literature regarding the extent to which academic human capital contributes to firm performance. This debate centers on the nature of an academic scientists human capital and its institutional specificity. Using data on the human capital of biomedical scientists developed during their careers in academe, this paper analyzes how the depth of their scientifically and commercially oriented academic human capital contributes to firm performance when these scientists subsequently start or join for-profit firms. We find that the scientific and commercial components of an academic scientists human capital have differential effects on the performance of research and invention tasks at the firm. We also find that the contribution of an academic scientist to a firms patent productivity is decreasing with the depth of their scientifically oriented human capital, all else constant. These results support the view that academic human capital is heterogeneous and has an institutional specificity that mediates its value when applied in a commercialization environment.

Commercializing Science: Is There a University “Brain Drain” from Academic Entrepreneurship?

When academic researchers participate in commercialization using for-profit firms, there is a potentially costly trade-off---their time and effort are diverted away from academic knowledge production. This is a form of brain drain on the not-for-profit research sector that may reduce knowledge accumulation and adversely impact long-run economic growth. In this paper, we examine the economic significance of the brain drain phenomenon using scientist-level panel data. We identify life scientists who start or join for-profit firms using information from the Small Business Innovation Research program and analyze the research performance of these scientists relative to a control group of randomly selected research peers. Combining our statistical results with data on the number of university spin-offs in the United States from 1994 to 2004, we find the academic brain drain has a nontrivial impact on knowledge production in the not-for-profit research sector.