Trade-offs and complementarities between regional, sectoral, and national support policies for firms' innovation

Abstract

Public support for R&D can play a crucial role in addressing systemic failures that hinder the functioning of innovation systems, whether national, sectoral, or region-specific. However, little is known about the trade-offs and complementarities between subnational and national innovation policies. Here, we consider trade-offs and complementarities between national R&D support measures managed by UK Research and Innovation (UKRI), regional support provided by the Northern Ireland government, and sectoral support provided by the UK's Catapult network. Using a propensity score matching combined with a difference-in-difference event study analysis, we find evidence of dynamic complementarities between subnational and national innovation policies. Both regional and sectoral innovation support measures have positive effects on both employment and turnover growth. However, each subnational policy targets somewhat different groups of firms to national policy measures. Strong static and dynamic complementarities are also evident between sectoral and national support, as firms initially supported by the Catapults are significantly more likely to secure national R&D funding in the future.