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Small Business Economics

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26-07-2016

The impact of public R&D subsidy on small firm productivity: evidence from Korean SMEs

Authors: Beom Cheol Cin, Young Jun Kim, Nicholas S. Vonortas

Published in: Small Business Economics | Issue 2/2017

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Abstract

This paper explores the effects of R&D promotion policy on SME performance. We use a large panel data set on public R&D subsidies to Korean manufacturing firms. We control for counterfactual outcomes employing the DID (difference in differences) estimation procedure as well as for the endogeneity of the R&D investment and the R&D subsidy using the 2-stage Tobit/Logit DPD (dynamic panel data) procedure. We find significant evidence for positive effects of the public R&D subsidy on both the R&D expenditure and the value added productivity of Korean manufacturing SMEs. The policy thus appears to have been successful in fostering technological advancement and in promoting economic growth.

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We use the definition from The Bank of Korea (i.e. the central bank in Korea) for value-added (VA). See OECD (2001) for further discussion about various productivity measures.

Since we used unbalanced data across the variables, the numbers of observations for variables used here are different depending on the number of missing observations.

See Appendix 3 for the pooled OLS and panel estimation results.

In Appendix 3, the Breusch-Pagan LM test statistics indicates that the null hypothesis of no heterogeneity effects can be rejected at the 1 % level for all cases. This implies that the simple pooled-OLS estimation should lead to biased results.

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Title: The impact of public R&D subsidy on small firm productivity: evidence from Korean SMEs
Authors: Beom Cheol Cin
Young Jun Kim
Nicholas S. Vonortas
Publication date: 26-07-2016
Publisher: Springer US
Published in: Small Business Economics / Issue 2/2017
Print ISSN: 0921-898X
Electronic ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-016-9786-x

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