The behavior of Spanish manufacturing companies is very different when faced with public aid to stimulate R Tax incentives appear to be a good instrument for companies with few financial restrictions and whose projects have high appropriability, although they cease to stimulate projects that could be financed. These incentives are also effective for companies with continuous innovation or that want to increase their innovative intensity.
Subsidies, on the other hand, can complement tax incentives for a very particular number of companies: young companies, companies that did not innovate before, or knowledge-intensive companies. Subsidies are a better instrument than tax incentives if the objective is to increase the number of innovative companies.
Traditionally, the effectiveness of public support has been studied in its objective of stimulating the generation of R However, there is a prior issue that has to do with the decision-making of companies in using public aid, that is, participating or not in the different instruments that are available to them: subsidies, soft loans, or tax incentives. In this study, we try to study whether the decision to participate in some or both instruments has to do with market failure problems that companies usually face: financial restrictions and appropriability of returns derived from innovation. With a sample of potentially innovative companies belonging to the manufacturing sector for the period 2005-2008, we have verified that companies facing financial restrictions and are newly created are less prone to the use of tax incentives and more prone to obtaining direct aid. In addition, large companies that use intellectual property protection methods are more prone to the use of direct aid, while SMEs use more tax incentives. These results seem to suggest that both instruments to incentivize R, direct aid and tax incentives, do not seem to go in the same direction in correcting the problem of low private investment in R
Article published in Small Business Economics (2014) 43(3): 571-596