Financing Innovation: Evidence from R&D Grants
- (pp. 1136-64)
Abstract
Governments regularly subsidize new ventures to spur innovation. This paper conducts the first large-sample, quasi-experimental evaluation of R&D subsidies. I use data on ranked applicants to the US Department of Energy's SBIR grant program. An early-stage award approximately doubles the probability that a firm receives subsequent venture capital and has large, positive impacts on patenting and revenue. These effects are stronger for more financially constrained firms. Certification, where the award contains information about firm quality, likely does not explain the grant effect. Instead, the grants are useful because they fund technology prototyping.Citation
Howell, Sabrina T. 2017. "Financing Innovation: Evidence from R&D Grants." American Economic Review, 107 (4): 1136-64. DOI: 10.1257/aer.20150808Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L53 Enterprise Policy
- O31 Innovation and Invention: Processes and Incentives
- O34 Intellectual Property and Intellectual Capital
- O38 Technological Change: Government Policy