Public R&D funding: Does the source determine the strategy

Abstract

The aim of this study is to analyze whether the receipt of public funding determines firm's R&D Strategy selection. This issue is crucial as previous studies have shown that each R&D strategy is associated to a higher, or lower, innovation performance. We consider three R&D strategies - make, buy, make-buy- and three different sources of public funding -Regional, State and other, such as EU- .The model estimation is performed through a multinomial logit model with random effects with a sample of 457 large firms for the period 1992-2005, taken from the Spanish Survey of Business Strategies. The main finding of this study is that the source of the funding influences whether firms select the make, buy or make-buy strategy. Additionally, due to the panel structure of the sample, we observe that the effect public funding on the R&D strategy selection last longer for State and Regional funds that for Other funds.