Instrument policy mix and firm size: is there complementarity between R&D subsidies and R&D tax credits?

<p>Nowadays, a rising number of evaluations investigates a multifaceted concept of the policymix. Our study specifically focuses on the mix of two most frequently used supply-sideinstruments–R&D subsidies and R&D tax credits. Drawing on the longitudinal sample ofSpanish manufacturing firms, we investigate whether there is a complementary interactionbetween these policy instruments with respect to product and process innovations. Moreover,by employing a dynamic random-effects probit estimator, we account for the persistenceof innovation and endogeneity of public support. The results, that are separatelyestimated for SMEs and large firms, uniformly show evidence of no interplay between twopolicy instruments either in SMEs or large firms. However, among factors that influencethe propensity to product and process innovations, by far, the largest effect is generated bytrue state dependence. These findings provide some policy implications for fostering productand process innovations in the long run.</p>