R&D subsidies from Research Council of Norway and firm performance in the period 2006-2019

In this report, we provide an overview of the development of R&D and growth in enterprises that have been granted funding from the Research Council of Norway (RCN) during the period 2006 to 2019. Using regression analysis, we estimate the effects of financial support from the RCN on R&D intensity (i.e., research and development total expenditures per employee), number of employees, turnover and productivity.

Recipients of grants from RCN are not representative for the entire population of Norwegian enterprises. This applies to both size, industry and R&D intensity. To narrow the analysis to comparable enterprises, we restrict the analysis to enterprises that have applied for funding from the RCN and which have received similar project assessments, but where some project applications have been awarded funding and others have not.

Using RCN's allocation practice we identify enterprises with project applications with equally high overall grades, but where some applications have been approved for funding and others have been rejected. We then look at development in R&D total expenditures, IPR (i.e. the number of patent-, design- and trademark applications), the number of employees, turnover and productivity in enterprises that have received support (treated group) relative to enterprises that have not received support in the same allocation year (control group). Where possible, we compare the results for young enterprises vs older enterprises.

Our main findings are that enterprises with approved applications in a given allocation year (and who have not received any other grants from RCN in the year before or after this allocation year) have higher growth in subsequent years both in R&D intensity and the number of employees compared to the enterprises in the control group.

For the economic outcome variables such as turnover and productivity, we find no significant differences except for the higher turnover in the group of the newly established firms receiving support. None or little effect on turnover and productivity is as expected, as it will take some time for the increased R&D efforts to possibly produce economic results. The estimated effects in the regression analyses tend to be stronger for the small firms and newly established firms.

Concerning the group of enterprises that have applied for or received funding for two consecutive years, these stand out as larger and more R&D intensive than other enterprises. To the extent that more growth can be observed here than in the control group of enterprises that were not supported neither in the allocation year, the year before or the year after, it is likely due do the characteristics of the enterprise rather than the fact that they have received economic support. For example, for this group of firms we cannot exclude self-selection.