The Speed of the Effects of Publicly Funded Research on Business R&D, Innovation and Innovation Behaviour: Evidence from UK Firms

Abstract

This study contributes to the understanding of the speed of the effects of publicly funded research – R&D grants – on firm R&D, innovation and innovation behaviour. We argue that while the speed of the positive effects on R&D (i.e. input additionality; IA) tightly relates to public support programmes’ requirement of private contribution in R&D spending, the positive effects on innovation (i.e. output additionality; OA) and innovation behaviour (i.e. behavioural additionality; BA) are temporally delayed, linked to the explorative nature of learning associated with publicly funded projects and obstacles to changes in the innovation behaviour of firms. We empirically test our theoretical framework for a sample of R&D-intensive UK firms to find that while IA occurs in the year following receipt of R&D grants, BA takes 3 years after receipt of R&D grants to occur. We do not find that grants have a positive effect on either product or process innovation. In measuring BA, we employ a ‘classical’ treatment and control group evaluation without relying on firms’ perceptions of how the receipt of grants affected their innovation behaviour. Our findings have significant implications for both management practice and policy.