Abstract
An assessment of the economic impact that can be achieved through grants makes it possible to refine such policy instruments in order to make public funding more effective in relation to the objectives pursued. In this paper, we investigate the effects of a business development grant scheme. More specifically, we question whether firms’ performance measures increased after receiving such grants. Methodically, we match grant receiving firms with grant non-receivers and estimate the average treatment effect on the treated using a two-way fixed effects regression. Our results point towards a positive effect of the grant scheme, which is particularly evident for firms of smaller size. Our estimated dose-response functions show that the share of grant amount in firm profits needs to be high enough for the grants to be effective. According to back-of-the envelope analysis, benefits outweigh the direct scheme costs.
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Notes
For a systematic literature review of non-R&D public grants impact evaluations, see Dvoulety, Srhoj and Pantea (2020).
Please note the change in the name of the Ministry. In the period, it was firstly Ministry of Economy, Labour and Entrepreneurship, then Ministry of Entrepreneurship and Crafts, and is currently (2018) part of the Ministry of Economy, Entrepreneurship and Crafts.
This grant scheme targeted industries like shipbuilding or textile, and therefore, many similar firms benefited from this scheme, which makes obtaining a good counterfactual particularly difficult.
Or about €3600.
Or between €3600 and €7400.
Caliper is set to default value 0.25.
All of these results are available from authors upon request.
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Srhoj, S., Lapinski, M. & Walde, J. Impact evaluation of business development grants on SME performance. Small Bus Econ 57, 1285–1301 (2021). https://doi.org/10.1007/s11187-020-00348-6
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DOI: https://doi.org/10.1007/s11187-020-00348-6
Keywords
- Business development grants
- Policy evaluation
- Two-way fixed effects regression
- Matching
- Heterogeneous treatment effects
- Dose-response-function