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The Effects of Government-Industry R&D Programs on Private R&D: The Case of the Small Business Innovation Research Program

Scott J. Wallsten
The RAND Journal of Economics
Vol. 31, No. 1 (Spring, 2000), pp. 82-100
Published by: Wiley on behalf of RAND Corporation
Stable URL: http://www.jstor.org/stable/2601030
Page Count: 19
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The Effects of Government-Industry R&D; Programs on Private R&D;: The Case of the Small Business Innovation Research Program
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Abstract

I ask whether government-industry commercial R&D grants increase private R&D. Regressing some measure of innovation on the subsidy can establish a correlation between grants and R&D, but it cannot determine whether grants increase firm R&D or whether firms that do more R&D receive more grants. Using a dataset of firms involved in the Small Business Innovation Research (SBIR) program, I estimate a multiequation model to test these hypotheses. Firms with more employees and that appear to do more research win more SBIR grants, but the grants do not affect employment. Moreover, I find evidence that the grants crowd out firm-financed R&D spending dollar for dollar.

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