Bidding against the odds? The impact evaluation of grants for young micro and small firms during the recession
Impact evaluations of business development grants targeting young firms have been somewhat neglected in the literature. While most research studies focus on the impact of research and development grants, a larger percentage of young firms would benefit from grants that assist them in business development activities. In this paper, we examine the impact of small business development grants on young small firm survival, turnover growth, labor growth, and access to external finances. We study this topic in the context of a long recession in Croatia (2009 to 2014), which makes it possible to better observe the effect of the public instrument intervention. Results show positive effect on firm survival and on obtaining long-term bank loans and no significant effects on firm performance. The grant scheme was most successful for firms newest to the market.
KeywordsGrants Recession Young firms Survival Firm performance Bank loans
JEL classificationH25 L26
We thank the associate editor László Szerb and the two anonymous referees for their comments and suggestions. Draft version of the paper was presented during Training Workshop ‘Evaluations of Innovation Policies’ held from 21 to 22 November 2017 in Zagreb, within the project “Strengthening scientific and research capacity of the Institute of Economics, Zagreb as a cornerstone for Croatian socioeconomic growth through the implementation of Smart Specialization Strategy” (H2020-TWINN-2015-692191-SmartEIZ). This research is also supported by TVOJ GRANT@EIZ, financed by the Institute of Economics, Zagreb. The manuscript has been awarded the Hans Raupach 2018 Award by the Leibniz Institute for East and Southeast European Studies Economics Department, best paper award at the final conference of the EU Horizon 2020 Twinning project H2020-TWINN-2015-692191-SmartEIZ, and was also presented at the DRUID2018 conference in Copenhagen in June 2018. The views expressed in this paper are solely of the authors and do not represent the views of the either of two projects.
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