Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
R&D investment is a key factor in long run economic growth. This paper analyzes the effectiveness of public grants and tax credits used to promote long-run R&D investment. Cointegration techniques have been used to deal with the existence of common trends, which might lead to spurious correlation. In this context, we propose a new empirical strategy applying DOLS and FMOLS estimators to the cointegrated firms and the LSDV estimator to non-cointegrated firms. Cointegrated firms are those that invest persistently in R&D while non-cointegrated firms invest in a non-continuous or occasional way. A panel of 237 Spanish manufacturing firms for the 1990–2009 period is used. We find evidence that public grants are more effective for firms where R&D investment is persistent and the quality of projects matters. In addition, our results suggest that a tax credit is suitable for boosting long-run R&D investment as a whole, especially if the base amount of tax credit is incremental. Surprisingly, incremental tax credit is only in force in a few countries such as Italy, Korea, Mexico, Portugal, United States and Spain.