Subsidy Entrepreneurs: an Inquiry into Firms Seeking Public Grants

Anders Gustafsson1, Patrik Gustavsson Tingvall2, Daniel Halvarsson3
1Örebro University & the Research Institute of Industrial Economics (IFN), Örebro, Sweden
2The European Institute of Japanese Studies (EIJS), Stockholm School of Economics & National Board of Trade Sweden, Stockholm, Sweden
3The Ratio Institute, Stockholm, Sweden

Tóm tắt

Abstract This paper studies the incentives and characteristics of firms that apply for, and eventually receive, one or multiple governmental grants intended to stimulate innovation and growth. The analysis departs from a contest model in which entrepreneurs are free to allocate their effort between production and seeking grants. The results suggest that highly productive entrepreneurs abstain from seeking grants, moderately productive firms allocate a share of their effort to grant seeking, and low-productivity firms allocate most resources to seeking grants. Due to their efforts in seeking grants, these low-productive subsidy entrepreneurs also have a relatively high probability of receiving the grants. Using comprehensive data over grants from the three largest grant-distributing agencies in Sweden, we find concordant evidence of a negative relation between the probability of receiving a grant and firm productivity. As we go from single- to multiple-grant-supported firms, this negative relation becomes more pronounced.

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