This paper integrates innovation input and output effects of R&D subsidies into a modified Crépon-Duguet-Mairesse (CDM) model. Our results largely confirm insights of the input additionality literature, i.e. public subsidies complement private R&D investment. In addition, results point to positive output effects of both purely privately funded and subsidy-induced R&D. Furthermore, we do not find evidence of a premium or discount of subsidy-induced R&D in terms of its marginal contribution on new product sales when compared to purely privately financed R&D.
Czarnitzki, Dirk and Julie Delanote (2016), Incorporating Innovation Subsidies in the CDM Framework: Empirical Evidence from Belgium, ZEW Discussion Paper No. 16-045, Mannheim, published in: Economics of Innovation and New Technology. Download