Small Business Economics

, Volume 39, Issue 4, pp 921–936 | Cite as

Picking the winner? Empirical evidence on the targeting of R&D subsidies to start-ups

  • Uwe Cantner
  • Sarah Kösters


This paper investigates the allocation of R&D subsidies given to start-ups. Considering the coexistence of various R&D project schemes, we take an aggregate view and analyze the determinants of the receipt of (any) R&D subsidies within the first three business years of the start-ups. We argue that policymakers and funding authorities follow a strategy of “picking the winner”. Analyzing start-ups in the East German state of Thuringia, we conduct logistic regressions and find ambiguous support. R&D subsidies are given to start-ups with innovative business ideas, especially academic spin-offs. Although the ambitions and patent stock of the founder(s) do not decide the receipt of R&D subsidies, team start-ups and the initial capital of a start-up tend to affect this decision positively. Hence, we cannot exclude a “picking the winner” strategy in targeting R&D subsidies to start-ups. More generally, however, the problems of policy targeting question the massive subsidization of private R&D.


Start-ups R&D subsidies Subsidy allocation 

JEL Classifications

O38 L26 L52 



Financial support by the Thuringian Ministry of Education (Thüringer Kultusministerium) and the Hans-Böckler-Stiftung within the research project “Success and Failure of Innovative Start-ups—A Process-oriented Analysis of Economic and Psychological Determinants” is gratefully acknowledged. We thank the members of the DFG RTG 1411 “The Economics of Innovative Change” for helpful comments. Furthermore we are grateful for the comments of the anonymous reviewers of SBEJ and the editor. The usual caveats apply.


  1. Arrow, K. J. (1962). Economic welfare and the allocation of resources for invention. In R. R. Nelson (Ed.), The rate and direction of inventive activity (pp. 609–625). Princeton: Princeton University Press.Google Scholar
  2. Aschhoff, B. (2008). Who Gets the Money? The Dynamics of R&D Project Subsidies in Germany. ZEW Discussion Paper No. 08-018.Google Scholar
  3. Autio, E. (2005). GEM 2005 Report on High-Expectation Entrepreneurship, Accessed 21 Apr 2009.
  4. Baptista, R., & Preto, M. T. (2006). Entrepreneurship and Industrial Re-structuring: what kinds of startups matter most for job creation? Technical University of Lisbon, IN+, Instituto Superior Técnico, Discussion Paper 06/06.Google Scholar
  5. Bassi, L. J. (1984). Estimating the effect of training programs with non-random selection. The Review of Economics and Statistics, 66(1), 36–43.CrossRefGoogle Scholar
  6. Belitz, H., Berteit, H., Fleischer, F., & Stephan, A. (2001). Staatliche Förderung von Forschung und Entwicklung in der ostdeutschen Wirtschaft—Eine Bilanz, Deutsches Institut für Wirtschaftsforschung, Wochenbericht, 68, 35, 537–544.Google Scholar
  7. Belli, R. F., Lee, E. H., Stafford, F. P., & Chou, C. (2004). Calendar and question-list survey methods: Association between interviewer behaviors and data quality. Journal of Official Statistics, 20(2), 185–218.Google Scholar
  8. Blanes, J. V., & Busom, I. (2004). Who participates in R&D subsidy programs? The case of Spanish manufacturing firms. Research Policy, 33(10), 1459–1476.CrossRefGoogle Scholar
  9. BMBF (2006). The High-Tech Strategy for Germany, Bundesministerium für Bildung und Forschung—Federal Ministry of Education and Research, Berlin. Available at: Accessed 20 Apr 2011.
  10. Cantner, U., & Kösters, S. (2009). R&D subsidies to start-ups—effective drivers of patent activity and employment growth? Jena Economic Research Papers, # 2009 – 027.Google Scholar
  11. Caspi, A., Moffitt, T. E., Thornton, A., Freedman, D., Amell, J. W., Harrington, H., et al. (1996). The life history calendar: A research and clinical assessment method for collecting retrospective event-history data. International Journal of Methods in Psychiatric Research, 6, 101–114.CrossRefGoogle Scholar
  12. Chaminade, C., & Edquist, C. (2005). From theory to practice: The use of the systems of innovation approach in innovation policy. In J. Hage, M. T. Meeus, & J. Thore (Eds.), Innovation, science, and institutional change (pp. 141–160). Oxford: Oxford University Press.Google Scholar
  13. Czarnitzki, D., Ebersberger, B., & Fier, A. (2007). The relationship between R&D collaboration, subsidies and R&D performance: Empirical evidence from Finland and Germany. Journal of Applied Econometrics, 22(7), 1347–1366.CrossRefGoogle Scholar
  14. Czarnitzki, D., & Fier, A. (2001). Do R&D subsidies matter? Evidence for the German Service Sector. ZEW Discussion Paper No. 01-19.Google Scholar
  15. Deutscher Bundestag (2005). Förderung von Forschung und Entwicklung in Ostdeutschland, Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten Michael Kretschmer, Katherina Reiche, Thomas Rachel, weiterer Abgeordneter und der Fraktion der CDU/CSU, Drucksache 15/5808. Available at: Accessed 10 Dec 2009.
  16. Edquist, C. (2001). Innovation policy in the systems of innovation approach: Some basic principles. In M. M. Fischer & J. Fröhlich (Eds.), Knowledge, complexity and innovation systems, advances in spatial science (pp. 46–57). Berlin, Heidelberg: Springer Verlag.Google Scholar
  17. Eickelpasch, A., & Fritsch, M. (2005). Contests for cooperation—a new approach in German innovation policy. Research Policy, 34(9), 1269–1282.CrossRefGoogle Scholar
  18. Fier, A., & Heneric, O. (2005). Public R&D policy: The right turns of the wrong screw? The case of the German Biotechnology Industry. ZEW Discussion Paper No. 05-60.Google Scholar
  19. Fritsch, M. (2008). How does new business formation affect regional development? Introduction to the special issue. Small Business Economics, 30(1), 1–14.CrossRefGoogle Scholar
  20. Grupp, H., Jungmittag, A., Schmoch, U., & Legler, H. (2000). Hochtechnologie 2000: Neudefinition der Hochtechnologie für die Berichterstattung zur technologischen Leistungsfähigkeit Deutschlands. Karlsruhe/Hannover: Fraunhofer-Institut für Systemtechnik und Innovationsforschung (ISI) und Niedersächsisches Institut für Wirtschaftsforschung (NIW).Google Scholar
  21. Hall, B. H. (2002). The financing of research and development. Oxford Review of Economic Policy, 18(1), 35–51.CrossRefGoogle Scholar
  22. Hart, D. M. (2003). Knowledge, power, and entrepreneurs: A first pass at the politics of entrepreneurship policy. In D. M. Hart (Ed.), The emergence of entrepreneurship policy—governance, start-ups, and growth in the U.S. knowledge economy (pp. 227–239). Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
  23. Kamm, J. B., Shuman, J. C., Seeger, J. A., & Nurick, A. J. (1990). Entrepreneurial teams in new venture creation: A research agenda. Entrepreneurship Theory and Practice, 14(4), 7–17.Google Scholar
  24. Koschatzky, K., & Lo, V. (2005). Innovationspolitik in den neuen Ländern—Bestands-aufnahme und Gestaltungsmöglichkeiten, ISI-Schriftenreihe Innovationspotenziale, Stuttgart: Fraunhofer IRB Verlag.Google Scholar
  25. Lechler, T. (2001). Social interaction: A determinant of entrepreneurial team venture success. Small Business Economics, 16(4), 263–278.CrossRefGoogle Scholar
  26. Lerner, J. (1999). The government as venture capitalist: The long-run impact of the SBIR program. Journal of Business, 72(3), 285–318.CrossRefGoogle Scholar
  27. Lundvall, B.-Å., Johnson, B., Andersen, E. S., & Dalum, B. (2002). National systems of production, innovation and competence building. Research Policy, 31, 213–231.CrossRefGoogle Scholar
  28. Luukkonen, T. (2000). Additionality of EU framework programmes. Research Policy, 29(6), 711–724.CrossRefGoogle Scholar
  29. Parker, S. C. (2007). Policymakers beware!. In: D. B. Audretsch, I. Griol & A. R. Thurik (eds.), Handbook of research on entrepreneurship policy (pp. 54–63). Max Planck Institute of Economics, Cheltenham: Edward Elgar Pub.Google Scholar
  30. Roberts, E. B. (1991). Entrepreneurs in high technology—lessons from MIT and beyond. New York, Oxford: Oxford University Press.CrossRefGoogle Scholar
  31. Santarelli, E., & Vivarelli, M. (2007). Entrepreneurship and the process of firms’ entry, survival and growth. Industrial and Corporate Change, 16(3), 455–488.CrossRefGoogle Scholar
  32. Shane, S. A. (2004). Academic entrepreneurship: University spinoffs and wealth creation, new horizons in entrepreneurship series. Cheltenham: Edward Elgar Pub.Google Scholar
  33. Shane, S. A. (2009). Why encouraging more people to become entrepreneurs is bad public policy. Small Business Economics, 33(2), 141–149.CrossRefGoogle Scholar
  34. Stiglitz, J. E., & Wallsten, S. J. (2000). Public-private technology partnerships—promises and pitfalls. In P. Vaillancourt Rosenau (Ed.), Public-private policy partnerships (pp. 37–58). Cambridge, MA: The MIT Press.Google Scholar
  35. Storey, D. (2000). Six steps to heaven: Evaluating the impact of public policies to support small business in developed economies. In D. L. Sexton & H. Landström (Eds.), The Blackwell handbook of entrepreneurship (pp. 176–194). Oxford: Blackwell Publishers Ltd.Google Scholar
  36. Storey, D. J. (2003). Entrepreneurship, small and medium sized enterprises and public policies. In Z. J. Acs & D. B. Audretsch (Eds.), Handbook of entrepreneurship research (pp. 473–511). Boston, MA: Kluwer Academic Publishers.Google Scholar
  37. Takalo, T., & Tanayama, T. (2010). Adverse selection and financing of innovation: Is there a need for R&D subsidies? The Journal of Technology Transfer, 35(1), 16–41.CrossRefGoogle Scholar
  38. Van Praag, M., De Wit, G., & Bosma, N. (2005). Initial capital constraints hinder entrepreneurial venture performance. Journal of Private Equity, 9(1), 36–44.CrossRefGoogle Scholar
  39. Wallsten, S. J. (2000). The effects of government-industry R&D programs on private R&D: The case of the Small Business Innovation Research program. RAND Journal of Economics, 31(1), 82–100.CrossRefGoogle Scholar
  40. Wiklund, J., & Shepherd, D. (2003). Aspiring for, and achieving growth: The moderating role of resources and opportunities. Journal of Management Studies, 40(8), 1919–1941.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC. 2011

Authors and Affiliations

  1. 1.Department of EconomicsFriedrich Schiller University of JenaJenaGermany
  2. 2.Department of Marketing and ManagementI2M Group, University of Southern DenmarkOdense MDenmark
  3. 3.DFG RTG 1411“The Economics of Innovative Change”Friedrich Schiller University of JenaJenaGermany

Personalised recommendations