Promoting Innovation: The Differential Impact of R&D Subsidies

Reda Cherif, Fuad Hasanov, Christoph Grimpe, Wolfgang Sofka

Research output: Working paperResearch


We investigate the effect of R&D subsidies on firms’ innovation by ownership, industry, and firm size using German firm-level data. The impact of R&D subsidies is heterogeneous across industries for multinational corporations (MNCs) and domestic firms while it does not differ substantially by firm size. Domestic firms have a larger response in R&D spending in low-tech manufacturing, knowledge-intensive services, and technological services while the response of domestic and foreign MNCs is broadly similar and is greater in medium-tech and high-tech manufacturing. Foreign MNC subsidiaries’ response in terms of patents is greater than that of domestic MNCs in most industries.
Original languageEnglish
Place of PublicationWashington, D.C.
PublisherInternational Monetary Fund
Number of pages41
Publication statusPublished - 2022
SeriesIMF Working Paper


  • Innovation
  • Patents
  • Research and development
  • R&D
  • Subsides
  • Multinationals
  • Investment
  • Technology policy

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