eThesis - School of Business electronic theses

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OBJECTIVES

This research addresses the lack of comprehensive answers on the impact of public R&D and business support on company performance. The research has a two-fold research objective: 1) to gather up the scattered information concerning the objectives of public support instruments in Finland; 2) to empirically examine what can we say about the firm-level impact of public R&D and business support on company performance.

DATA AND METHODOLOGY

As the public business support allocation process is not random and the allocation decisions are rather based on the company characteristics, the support decisions done by public support organizations are found to be endogenous. To tackle this problem this study uses the instrumental variable approach in evaluating the impact of public business support on company performance.

The data includes the following firm-level measures: turnover growth, export growth and private R&D expenditure growth. Based on the data, the turnover growth figures for the years 2004-2008 can be calculated for 261 703 companies of the sample. The export growth figures are calculated only for the companies that have reported a positive export figure at least once during the years 2004-2008. Respectively, the private R&D expenditure growth figures are calculated only for the companies that have reported positive private R&D expenditure at least once during the years 2004-2008. As a result, the export growth figures for the years 2004-2008 can be calculated for 1 649 companies of the sample and the private R&D expenditure growth figures for 1 424 companies of the sample.

RESEARCH RESULTS

The results indicate that the turnover growth of publicly supported companies is faster than the turnover growth of unsupported companies, but that the impact of public business support on growth is small.

The estimated model measuring the impact of public business support on private R&D expenditure growth doesn’t explain the fluctuations in growth rates very well. However, according to the statistically significant results Tekes fails to support the private R&D expenditure growth. Thereby, the results indicate that there is crowding out related to the public support allocated by Tekes.

Finnvera supports the private R&D expenditure growth of large companies and TEM the private R&D expenditure growth of all companies.

It is not possible to provide conclusive answers about the impact of public business support on export growth. According to the results, the support allocated by TEM has a positive impact on export growth and the support allocated by MMM has a positive impact on SMEs’ export growth.