Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/250387
Year of Publication: 
2022
Series/Report no.: 
ZEW Discussion Papers No. 22-003
Publisher: 
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim
Abstract: 
Foreign-owned subsidiaries make significant contributions to national Research and Development (R&D) in many host countries. Policymakers often support subsidiaries through R&D grants and R&D tax credits. A key objective of this funding is to leverage R&D-driven firm performance benefits for the host economy. However, the subsidiary's parent firm may decide not to exploit the results from publicly-funded R&D projects in the host country. Therefore, supporting subsidiaries' R&D presents a risk that significant amounts of public funding may translate into little, or no payoffs for the host economy. Our study provides the first evaluation of 1) whether public R&D funding stimulates additional R&D investment in subsidiaries, 2) whether policy-induced R&D drives subsidiary performance, and 3) the differential effects of R&D grants and R&D tax credits. Drawing on a unique panel dataset for Ireland (2007-2016), we find that both R&D supports drive subsidiary R&D, resulting in substantial host country firm performance benefits.
Subjects: 
Public funding for R&D
Firm performance
Firm ownership
Foreign-owned subsidiaries
Multinational enterprise
R&D tax credit
R&D grant
Policy evaluation
JEL: 
D22
O25
F23
F21
O38
D04
H25
O31
Document Type: 
Working Paper

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