The Effects of Public R&D Subsidies on Firms' Innovation Activities: The Case of Eastern Germany

This study analyzes the effects of public R&D policy schemes on the innovation activities of firms located in Eastern Germany. The main question in this context is whether public funds stimulate R&D activities or simply crowd out privately financed R&D. Empirically, we investigate the average causal effects of all public R&D schemes in Eastern Germany using a non–parametric matching approach. Compared to the case where no public financial means are provided, it turns out that firms increase their innovation activities by about four percentage points