Are Regional Policies Effective? An Empirical Evaluation on the Diffusion of the Effects of R&D Incentives

This paper provides evidence on the effectiveness of R&D incentives to private firms allocated by Region Umbria in the period between 2004 and 2009. The methodological innovation proposed in this paper is a novel spatial Difference-in-Difference estimator. Our approach compares distinct treatment effects on the basis of the localization in the main local market areas of Umbria (Perugia and Terni), controlling for the presence of technological spillovers due to geographical and economic proximity. The results show a positive and statistically significant impact of the subsidies, especially for innovative outputs and for small firms. The impact is higher for the firms located in less concentrated areas, suggesting the presence of significant local technological and economical spillovers due to the conjunct action of regional policies and spatial diffusion of the activities. Finally, this paper provides some empirical evidence in favour of the effectiveness of «place-based» innovation policies which constitutes the «core» of the recent smart specialization strategy