The Role of Additionality in Evaluation of Public R&D Programmes

Transcription

1 The Role of Additionality in Evaluation of Public R&D Programmes Georg Licht Centre for European Economic Research (ZEW) Mannheim, Germany Additionality: Making Public Money Make A Difference 11. Annual TAFTIE Seminar Vienna November 24-25, 2003

2 Rationales for Innovation Policy Static Market Failures: Underinvestment in innovation due to lacking appropriability and/or imperfect capital markets Dynamic Market Failures: e.g. Lock-in-Effects: Underinvestment in new technologies because large past investments making new technologies inefficient in the short run; This behaviour prohibits the full use of cumulative gains of early introduction/diffusion of new technologies (Learning effects) Co-ordination Failures: Underinvestment in new technologies because innovation needs coordination between various players (suppliers, customers, public R&D) Public Good Dimension : Unterinvestment in technologies which are desirable from a societal point of view (e.g. environmental safe technologies)

3 Additionality - A Conceptual Definition Creation of additional welfare which would have not occurred without government invention by relying purely on market forces Discounted present value of this welfare gain exceeds the discounted total costs (including private costs) of the invention However: Not useful for practical applications due to severe measurement problems with respect to the welfare dimension, the cost dimension and the time dimension

4 Measurable Concepts of Additionality Output Additionality: The increase in innovation outputs which would not have been achieved without intervention (e.g. new products, jobs, sales) Input Additionality: The increase of additional resources devoted by firms to activities intended by the intervention (e.g. increase in R&D spending, hiring of researchers) Behavioral Additionality: Changes in the behaviour of firms inducing a more efficient transformation of innovation inputs to innovation outputs; These changes should be permanent in character (e.g. collaborations with other firms or universities, improving R&D management process)

5 Output Additionality How do measure the output of innovation projects? - No. of papers (basic research) - No. of patents (applied research) - Share of sales of new products/market novelties development) - Productivity increase; Reduction of unit costs - Licence income; Knowledge transferred to third parties - New/additional jobs or sales - Innovation in certain areas of technology (etc.) Assignment problem: Relation of intervention of output - Even small firms often have more than one product; - No 1:1 relation of sponsored project to innovative output; - Complementarily between sponsored project and other projects Critical: Time frame; Project vs. firm level; Modelling transformation of innovation input to innovation output

6 Output Additionality: Example Patent Productivity in East Germany Probability of Patent Application Probit-Regression Coeff Std. Err. R&D sponsored by government FuE 0,32 *** 0,09 R&D financed by firm s own funds 0,45 *** 0,12 Incl. Industry; Size; Time dummies Log-Likelihood -211,73 No. of Patent Application Negativ-Binomial Regression Coeff Std. Err. R&D sponsored by government FuE 0,81 *** 0,21 R&D financed by firm s own funds 0,94 *** 0,23 Incl. Industry; Size; Time dummies Log-Likelihood -351,785

7 Input Additionality Relation of Sponsored Input to Innovative Inputs financed from other sources Full additionality: No displacement between sponsored input (e.g. R&D) Advantage: Easy to observe; Immediate measurement possible (R&D expenditure, R&D personal, etc.) Critical: Relation of sponsored project to other projects Especially useful for government intervention which aims at increasing firms input to innovaton But: How to account for effects like increasing returns to scale in R&D / indivisibility of R&D projects

8 Example: Additionality for Technology-Specific Programmes of the German Research Ministry Making Project Possible Increasing Technological Content Increasing Project Size Speeding up Start of Project Patent application Reducing Project Duration 0% 20% 40% 60% 80% Share of Recipients

9 Example: Programme Additionality for Different Sponsors Making Project Possible Increasing Technological Content Increasing Project Size Regional Authorities Making Project Possible Increasing Technological Content Increasing Project Size Speeding up Start of Project Patent application EU Speeding up Start of Project Patent application Reducing Project Duration Reducing Project Duration 0% 20% 40% 60% 80% Share of Recipients 0% 20% 40% 60% 80% Share of Recipients Making Project Possible Increasing Technological Content Increasing Project Size Speeding up Start of Project Patent application Reducing Project Duration 0% 20% 40% 60% 80% Share of Recipients Ministry of Economics Ministry of Research Making Project Possible Increasing Technological Content Increasing Project Size Speeding up Start of Project Patent application Reducing Project Duration 0% 20% 40% 60% 80% Share of Recipients

10 Measurement Approaches for Input Additionality Central question: What is the level of input if a sponsored project/firm did not receive the subsidy? New developments in econometric evaluation can be used to solve this problem: Counter-factual Approach - Compare firms/projects with and without subsidy - Compare firms before project starts and during project time (Change in R&D expenditure, R&D personal, etc.) - Compare growth rates of R&D between firms with and without subsidy Problem: Firms are increasingly heterogeneous; Which firms to compare?

11 Participation Probability: Technology Specific Project Grants Coefficient Std. Err. Probit Model Based on German Innovation Survey Data Log. Intraindustry Spillovers 0,8387 0,3770 (Log. Intraindustry Spillovers) 2-0,0481 0,0271 No. Of firms x Spillover -0,0233 0,0099 Technological Opportunities 0,1316 0,0734 No. of competitors 0,3568 0,1032 East Germany 0,4346 0,0512 Export (yes/no) 0,2039 0,0608 Log. Interindustry Spillover 1,2237 1,1298 Suppliers/Customers as source of knowledge Industry Dummies Year Dummies Size dummies No. of observations McFadden R 2 0,116 McKelvey R 2 0,229-0,6739 0,1445 included included included 7878

12 Example: Input Additionality of Technology-Specific Projects Grants in Germany Comparing firms with subsidies and non-subsidies firms taking into account propensity for receiving a subsidy and only equate firms from the same region, same industry and same size Firm level R&D Intensity No. Subsidies Firms Comparison group Treatment effect (Std err) (0.0033)

13 Behavioural Additionality Beyond immediate impacts on innovation input Intervention has potential impacts on firm strategy and firm capabilities (dynamic learning effects) - Project management skills - Learning how to use the IPR system - Co-operation with other firms and/or universities etc. - Impact of location of firms R&D and/or production Those effects are probably have long-lasting impacts on firm s innovative abilities and innovative behaviour Policy is increasingly aware of those impacts Hard to measure

14 Trend in Innovation Policy Increasing importance of framework condition Increasing the support to universities and non-university research Increasing importance of projects stimulate linkage within an innovation system Increasing use of indirect support measures (e.g. R&D tax credits) Increasing awareness of R&D in small and medium size firms

15 Increasing Importance of Collaborative Projects Production technology Computer Science Physical/Chemical Technologies Share of collaborative projects in government R&D financing of firm s R&D by areas of technology in 2000 in Germany Microsystems Technology Energy New Materials Environmental Technologies Information Sciences Basic Research Mobility / Transport Renew able Energies Multimedia Biotechnology Maritime Technologies Air Transport Space Nucleare Energy Rebuilding Nucleare Plants

16 Trends in Innovation Policy Increasing importance of framework condition Increasing the support to universities and non-university research Increasing importance of projects stimulate linkage within an innovation system Increasing use of indirect support measures (e.g. R&D tax credits) Increasing awareness of R&D in small and medium size firms Increasing importance of additionality Impacts on the use of additionality concepts used for evaluation

17 The Role of Additionality in Evaluation of Public R&D Programmes Georg Licht Centre for European Economic Research (ZEW) Mannheim, Germany Additionality: Making Public Money Make A Difference 11. Annual TAFTIE Seminar Vienna November 24-25, 2003