Public R&D support for newly founded firms – effects on patent activity and employment growth

Par Uwe Cantner, Sarah Kösters
By addressing the effectiveness of entrepreneurship policy this paper attempts to fill a gap in the literature. By using a dataset of highly innovative start-ups in the East German state of Thuringia the impact of R&D subsidies on start-ups’ employment growth and their patent output is analyzed. Presumed selection biases between subsidized and non-subsidized start-ups are accounted for by conducting propensity score matching. We find that R&D subsidies lead to an increase in employment growth of about 66%. Furthermore, subsidized start-ups show a 2.8 times higher patent output. These estimates provide evidence for the additionality of R&D subsidies within the first three business years. Moreover, our analysis points to a successful policy targeting of academic spin-offs.
JEL Codes: O38, H59, C14
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