Multilevel innovation policy mix: impact of regional, national, and European R&D grants

Abstract Research and Development (R&D) grants are one of the most commonly employed programmes by regional, national, and European governments to promote innovation at the firm level. This study contributes to the existing literature on innovation policy mix by investigating whether combinations of the three funding sources can yield positive effects on various measurements of innovation outcomes. Using a panel of 10,045 Spanish firms from 2004 to 2016 and a flexible conditional difference-in-differences approach, our findings reveal that R&D grants funded by European sources exert the most substantial positive impact on firms’ product and process innovations. Conversely, national funding demonstrates this impact on new-to-market innovations and patent applications. Notably, the positive effect on innovation outcomes is evident only when considering the combination of all three distinct funding schemes and the amalgamation of regional and national R&D grants. These results reject the possibility of substitutive effects among different funding schemes, particularly between regional and national institutions.