Template-type: ReDIF-Paper 1.0
Author-Name: Diego Sancho-Bosch
Author-Email: diesan07@ucm.es
Author-Workplace-Name: Department of Economic Analysis, Universidad Complutense de Madrid (Spain)
Author-Name: Elena Huergo
Author-Email: ehuergoo@ucm.es
Author-Person: phu56
Author-Workplace-Name: ICAE – Department of Economic Analysis, Universidad Complutense de Madrid (Spain)
Title: When More Is Not Better: Heterogeneous Dose–Response Effects of R&D Subsidies by Firm Size
Abstract: This paper examines how the level of public R&D subsidies and firm size jointly
	influence firms’ net R&D investment. Using data on Spanish manufacturing firms
	from 2008 to 2018, we estimate parametric and non-parametric dose–response
	functions after applying entropy weighting to balance covariate distributions
	across treatment levels. The results reveal an inverted U-shaped relationship
	between subsidy intensity and net R&D expenditure for small, medium-sized,
	and large firms, but not for very large firms, which display a negative linear
	pattern. We also find substantial heterogeneity in subsidy effects within both the
	SME and large-firm categories, and show that the public funding share of R&D
	expenditure at which the positive impact of subsidies peaks declines markedly
	with firm size. These findings suggest that support schemes should implement
	progressively lower maximum subsidy rates, rather than relying on only two
	distinct caps for SMEs and larger firms. Overall, the results underscore firm size
	as a critical determinant of innovation policy effectiveness and provide practical
	guidance for optimizing subsidy design.
Classification-JEL: L24; L25; O32; R11.
Keywords: R&D support, policy evaluation, dose-response, entropy balancing.
Length: 39 pages 
Creation-Date: 2025
Number: 2025-09
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae2509.txt
File-URL: https://hdl.handle.net/20.500.14352/129304
File-Format: Application/html
Handle: RePEc:ucm:doicae:2509