Information asymmetry, risk aversion and R&D subsidies: effect-size heterogeneity and policy conundrums

dc.cclicenceCC-BY-NC-NDen
dc.contributor.authorUgur, Mehmet
dc.contributor.authorTrushin, Eshref
dc.date.acceptance2022-08-27
dc.date.accessioned2022-09-14T15:08:14Z
dc.date.available2022-09-14T15:08:14Z
dc.date.issued2022-09-07
dc.descriptionopen access articleen
dc.description.abstractDrawing on the theory of contracts and Schumpeterian models of innovation, we demonstrate that information asymmetry and risk aversion are conducive to effect-size heterogeneity and sub-optimal allocation of R&D subsidies. Utilising an unbalanced panel of 43,650 British firms from 1998 to 2012 and an entropy balancing methodology, we find that R&D subsidies are less likely to generate additionality effects when: (a) firms are larger, older, or more R&D-intensive; and (b) investment in basic research or during crisis episodes is considered. We also report that over 85% of the subsidies are allocated to large, old and R&D-intensive firms that do not deliver additional R&D investment. Our findings reveal a policy conundrum: the case for R&D subsidies is stronger during economic downturns, when R&D investment is in basic research and when firm age, size and R&D intensity reflect success in converting R&D investment into innovative product lines; but the subsidy is less likely to increase business R&D under these conditions.en
dc.funderESRC (Economic and Social Research Council)en
dc.identifier.citationUgur, M. and Trushin, E. (2022) Information asymmetry, risk aversion and R&D subsidies: effect-size heterogeneity and policy conundrums. Economics of Innovation and New Technology,en
dc.identifier.doihttps://doi.org/10.1080/10438599.2022.2119563
dc.identifier.urihttps://hdl.handle.net/2086/22160
dc.language.isoenen
dc.peerreviewedYesen
dc.projectidES/K004824/1en
dc.publisherTaylor and Francisen
dc.researchinstituteInstitute for Applied Economics and Social Value (IAESV)en
dc.subjecteconomics of innovationen
dc.subjectR&D subsidyen
dc.subjectadditionalityen
dc.subjectinformation asymmetryen
dc.subjectrisk aversionen
dc.subjectentropy balancingen
dc.subjecteconometric impact evaluationen
dc.titleInformation asymmetry, risk aversion and R&D subsidies: effect-size heterogeneity and policy conundrumsen
dc.typeArticleen

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