Radical or incremental: Where does R&D policy hit?

Abstract

This study investigates the impact and effectiveness of a public R&D support policy. In a policy design that aims at incentivizing radical as well as incremental innovations, we test where the policy impact is highest. While the privately motivated R&D expenditures are significant for both types of innovation, the policy-induced part is significant only for radical innovation. Furthermore, given that the funding agency encourages collaboration, and particularly industry-science collaboration, we further test whether effects are enhanced in collaborating firms. We do not find any evidence pointing to increased effects for the latter.