The effect of R&D subsidies on private R&D

This paper investigates the relationship between government support for R&D and R&D expenditure. financed privately by firms using a comprehensive plant level data set for the manufacturing sector in the Republic of Ireland. We find that for domestic plants small grants serve to increase private R&D spending, while too large a grant may crowd out private financing of R&D. In contrast, evidence for foreign establishments suggests that grant provision causes neither additionality nor crowding out effects of private R&D financing, regardless of the size of the subsidy.