Subsidies and Innovation in the Recent Financial Crisis

Marek Giebel, Kornelius Kraft

Research output: Working paperResearch


We analyze the impact of subsidies on R&D expenditures in the financial crisis and beyond. The financial crisis has led to considerable turmoil in financing and, as a result, to restrictions of firms' access to external financing. Utilizing this fact, we identify and analyze financing constraints in two ways. First, firm financing constraints are determined via their credit rating and second, restrictions from the supply side are identified via the firm’s main banks capital reserves. The results of our empirical test imply that R&D investments of non-subsidized firms decrease during the crisis. This effect is particularly pronounced for firms that are affected by financing constraints on the firm or bank side. Finally, our results imply that subsidies can at least partially compensate for these negative effects.
Original languageEnglish
PublisherLeibnitz Centre for European Economic Research (ZEW)
Number of pages42
Publication statusPublished - 2021
SeriesZEW Discussion Papers


  • R&D investment
  • Financing constraints
  • Financial crisis
  • R&D subsidies

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