Connecting the Firm to External Knowledge
Chapter 5: Public Funding for Innovation and Research Cooperation
5. Public funding for innovation and research cooperation 5.1 INTRODUCTION In innovation policy circles in Europe there has, in the past two decades, been a growing awareness of the importance of fostering cooperative research. This is reflected by an increasing proportion of public funding awarded by the various regional, national and EU authorities to cooperative research networks rather than individual firms. Despite this development, the bulk of the econometric evaluation literature on public funding for innovation concentrates almost exclusively on the question of whether funding actually helps increase R&D expenditure by firms or the number of patents granted. Only a very limited number of studies have addressed the issue of whether public funding for innovation does indeed succeed in influencing the cooperative practices of firms. As stated below, these studies are not without problems. Some fail to address the problem of endogeneity caused by funding selectivity. Of those that do address the issue, Belderbos et al. (2004) make use of an instrumental variable regression analysis explaining different types of research cooperation, using lagged values of the explanatory variables as instruments. But they admit that lagged funding may still be partly endogenous in the sense that it may have been brought about by past targeting of firms involved in research cooperation, whose cooperative behaviour persists during the current period. Busom and Fernandez-Ribas (2004, 2008) and Aschhoff et al. (2006) do, for their part, present non-parametric matching analyses. But, due to the cross-sectional nature of their data with respect to a...
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