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Can government subsidies spur science-industry collaboration and innovation?

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Efforts to foster collaboration between science and industry have long been a part of innovation policy in many countries. Firms stand to benefit from accessing the specialized infrastructure and expertise available in universities. Researchers gain access to practical problems that can provide greater relevance for their research, and to industrial capabilities for manufacture and assistance in commercializing their ideas to take them to market. Yet, there are barriers that inhibit collaboration, including financing constraints, information asymmetries, and transaction costs in negotiating collaboration agreements.

Government subsidies may foster increased interaction between firms and scientific units. Such policies have been used for some time in the United States, Western Europe, and Japan. They are now also becoming common in middle- and high-income countries that are attempting to close the gap with the most developed countries through innovation. For example, Colombia, Malaysia, Mexico, and Poland all have programs that provide innovation subsidies for projects where firms collaborate with universities or public research centers. However, there is currently little empirical evidence on the causal effects of R&D subsidies for science-industry consortia, particularly for emerging economies.

In a recent paper, we studied the effect of the In-Tech program in Poland on science-industry collaboration, research and innovation, and product commercialization. This program provides grants to consortia of research entities and firms for proposed research projects. Applications receive a score based on peer reviewer ratings; applications with a score above a threshold are offered funding. Based on this funding rule, we used a regression discontinuity (RD) design to estimate the effects of receiving In-Tech funding for applicants to the 2012 and 2013 calls for proposals. Data from In-Tech application forms show that applicants above and below the cutoff have similar characteristics, suggesting that the RD approach is valid.

Follow-up information on projects and consortia outcomes came from a 2016 survey of 400 applicants that were above and below the funding cutoff. Our findings show that receiving In-Tech funding increases the probability of a project being completed by almost 60 percentage points (from about 20 percent completed to close to 80 percent completed). The survey responses on collaboration reveal that most consortia had already collaborated before applying to the program (about 85 percent of applications). However, the impact estimates show a 14 to 18 percentage point increase in the likelihood of a new collaboration taking place within the consortia since applying.

Looking at innovation outputs, we find that receiving In-Tech funding increases the probability that the consortium applied for a patent related to their proposed project (from about 15 percent to 60 percent) and there is no effect on applying for a patent for another project (figure 1). Most of the patent applications have been to the Polish patent office, with no significant increase in applications to the European office. Similarly, members of a consortium that received In-Tech funding are more likely to publish a paper related to their proposed project, with no significant effect on publications related to other projects (figure 1). Finally, for commercialization, we find that receiving In-Tech funding leads to about a 20 percentage points higher probability of a product related to the proposed project being ready for sale or currently being sold in Poland. However, these products currently only account for about 1 percent of firm sales.

Figure 1: Impact on Patents and Publications

 Impact on Patents and Publications

Note: The plots show sample means and sample 95 percent confidence intervals within one-unit-interval bins on either side of the funding cutoff. Local linear regressions over the 8-point range are plotted on either side of the cutoff.

Overall, we thus find that In-Tech grants satisfy the key additionality assumption, and do not just pay firms and researchers to do what they would have done anyway. Therefore, it seems possible for governments to spur additional collaboration and innovation between scientists and industry.


David McKenzie

Lead Economist, Development Research Group, World Bank

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