Banri Ito

Lecturer, School of Economics, Senshu University

Satoshi Nakano

Research Fellow, Keio Economic Observatory, Keio University

This paper examines the impact of public R&D subsidies on firm's R&D activities using micro-data on Japanese manufacturing firms from 1995 to 2005. We focus on two effects.

One is the quantitative impact of whether the public R&D subsidies crowed out firm's own R&D investment or not. The other one is qualitative impact of whether the subsidized firms increase R&D investment into the fields where social returns are large.

In the empirical analysis, we examine the causal effects of public R&D subsidies using propensity score matching and difference-in-differences technique. The results suggest that the level of firm's own R&D investments is not affected by public R&D subsidies and the public R&D subsidies encourage firm's R&D activity in specific fields such as environment and ICT which are expected as socially influential.