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This paper examines how employee earnings respond to a one-time cash flow shock in the form of a government R&D grant. In a regression discontinuity design, we find that the grant immediately increases average annual employee-level earnings by 2.9 |$\%$|⁠. This benefit accrues only to incumbent employees and rises with job tenure. The grant also affects firm growth, but the initial wage patterns do not appear to reflect growth or productivity. Instead, the evidence supports implicit equity financing within the firm, where employees initially accept lower wages from financially constrained firms and earn more when the firm has ability to pay. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

Higher country taxes on noxious manufacturing emissions lead to substantial increases in firms' R&D spending. The R&D response is entirely driven by those high-pollution firms most affected by emissions taxes. Pollution taxes increase the marginal value of R&D spending in polluting firms, even when this spending does not lead to new innovation. Pollution taxes have the strongest effect on R&D investment in sectors in which new invention is difficult to appropriate and outside knowledge is easier to acquire, suggesting an important reason dirty firms invest in R&D is to expand their capacity to absorb external knowledge and technical know-how. [ABSTRACT FROM AUTHOR]

To evaluate the effect of an R&D subsidy, one needs to know what the subsidized firms would have done without the incentive. This article studies an Italian program of subsidies for the applied development of innovations, exploiting a discontinuity in program financing due to an unexpected shortage of public money. To identify the effect of the program, the study implements a regression discontinuity design and compares firms that applied before and after the shortage occurred. The results indicate that the program was not effective in stimulating innovative investment. [ABSTRACT FROM AUTHOR]

We score 10-K text to obtain annual measures of financial constraints, with separate measures for firms reporting equity and debt financing issues. Equity market constraints are associated with firms funding growth opportunities, have more severe consequences for the firm following large unexpected negative shocks, and are likely driven by informational asymmetries. A significant population of firms reporting equity market constraints also declare that they possess material undisclosed proprietary information. Constraints in the debt markets are distinct and are linked to covenant violations. Our measures outperform others used in the literature in predicting investment cuts following negative shocks. [ABSTRACT FROM AUTHOR]

The increased size and influence of financial institutions and markets has widened the scope for divergence between value-creation and the value-added measured by national accounts. This paper uses a re-assessment of the concept of value, showing how its creation can be separated from income flows, to examine its potential under- or over-representation in conventional GDP. A revived (and revised) value theory offers new insight into the impact on measured income and growth of structural change (including financial sector growth and offshore outsourcing), and of recent national-accounting reforms including the capitalization of R&D spending. [ABSTRACT FROM PUBLISHER]

Through the interaction between financial constraints and R&D, I study two asset-pricing puzzles: mixed evidence on the financial constraints–return relation and the positive R&D-return relation. Unlike capital investment, R&D is more inflexible. A financially constrained R&D-intensive firm is more likely to suspend/discontinue R&D projects. Therefore, R&D-intensive firms' risk increases with their financial constraints. Conversely, constrained firms' risk increases with their R&D intensity. I find a robust empirical relation between financial constraints and stock returns, primarily among R&D-intensive firms. Moreover, R&D predicts returns only among financially constrained firms. This evidence suggests that financial constraints potentially drive the positive R&D-return relation. [ABSTRACT FROM PUBLISHER]

This study analyzes how promotion-based tournament incentives for non-CEO senior executives affect corporate innovation. We measure tournament incentives using the pay gap between a CEO and the next layer of senior executives. We find that tournament incentives are positively related to innovative efficiency, as measured by the number of patents and patent citations generated per million dollars of R&D expense. Our main finding holds in an instrumental-variable analysis and regressions using alternative innovation measures, including patent generality and originality indices and stock market reactions to patent grants. Consistent with prior theories, the positive effect of tournament incentives is found to be particularly pronounced during the period prior to CEO turnovers. [ABSTRACT FROM AUTHOR]

Is bank financing compatible with innovation? We show that an exogenous enhancement in the value of borrowers' patents, either through greater patent protection or creditor rights over collateral, results in cheaper loans. Using regression discontinuity design, we show that although R&D investment sharply drops following a financial covenant violation, the reduction is concentrated in firms with less productive R&D. Consequently, R&D reduction does not impair innovative output. Our results suggest that the property rights that patents confer to intellectual property and to lenders' judicious exercise of control rights allow bank loans to be a viable means of financing for innovative firms. [ABSTRACT FROM AUTHOR]

The stocks in a momentum portfolio, which contribute to momentum profits, do not experience significant subsequent reversals. Conversely, stocks that do not contribute to momentum profits over the intermediate horizon exhibit subsequent reversals. Merging these separate securities into a single portfolio causes momentum and reversal patterns to appear linked. Stocks with momentum can be separated from those that exhibit reversal by sorting on size and book-to-market equity ratio. Controlling for proxies for behavioral biases, market illiquidity, and macroeconomic factors does not affect our results. [ABSTRACT FROM AUTHOR]

Small and medium-sized enterprises (SMEs) use R&D support services to increase their R&D efficiency because they can facilitate innovation by supplying the planning and management functions that SMEs may lack. This study investigates the issues that can arise during service transaction processes and ways of improving SMEs' use of R&D support services. We discuss the different perspectives of clients and service providers in Korea, where R&D support services have just emerged, and consider how a government-funded research institute could act as an intermediary to bridge the gap between those perspectives. The findings, largely produced through interviews and surveys, are expected to advance our understanding of the R&D support service industries, and offer strategic and policy implications that will improve SMEs' use of such services and thus improve their innovation capabilities. [ABSTRACT FROM AUTHOR]

In most countries, basic research is supported by research councils that select, after peer review, the individuals or teams that are to receive funding. Unfortunately, the number of grants these research councils can allocate is not infinite and, in most cases, a minority of the researchers receive the majority of the funds. However, evidence as to whether this is an optimal way of distributing available funds is mixed. The purpose of this study is to measure the relation between the amount of funding provided to 12,720 researchers in Québec over a 15-year period (1998-2012) and their scientific output and impact from 2000 to 2013. Our results show that in terms of both the quantity of papers produced and their scientific impact, the concentration of research funding in the hands of the so-called 'elite' of researchers generally produces diminishing marginal returns. Also, we find that the most funded researchers do not stand out in terms of output and scientific impact. [ABSTRACT FROM AUTHOR]

Based on records of the European Research Council, we find that public investments in R&D shape the patterns of cross-border mobility among elite scientists in Europe. However, scientists do not systematically choose locations abroad that provide greater funding than their origin. Rather, we identify a high quality and performance of science systems as the main determinant for relocating in Europe, which corroborates the multiplying effect by resident top faculty attracting the best young talents from abroad. Notably, we also find preliminary evidence on the effectiveness of national research excellence initiatives policies as regards their ability to tap into the global talent pool. [ABSTRACT FROM AUTHOR]

This paper aims to model selection criteria of R&D projects for awarding direct subsidies to the private sector, in order to assist government agencies in improving the way in which they allocate the subsidies. The modeling involved three steps. The first step was a literature review of the criteria used to make the decisions. The second step involved structuring the revised criteria into a hierarchical matrix. The third step involved evaluating the proposed matrix by weighting the criteria using the analytic hierarchy process. The results obtained allowed the elucidation of these criteria, the proposal of a valid and detailed hierarchical matrix and the integration of the personal perceptions of the decision-makers with the specific objectives of a public organization. Thus, this model was demonstrated to be an appropriate tool for structuring these criteria. [ABSTRACT FROM AUTHOR]

We analyze the role public support plays in small and medium-sized enterprises (SMEs) R&D financing as well as these firms' assessments of financing conditions in the context of other framework conditions for innovation. Using the sample of 2,708 German SMEs that participated in public R&D promotion programs during 2005-10, we identify four unique types of R&D financing. Firms are generally positive about public financing of R&D in Germany, although a group of R&D companies without a track record that wish to introduce an innovation to the market find it difficult to procure a loan. SMEs perceive obstacles to innovation primarily in the non-financial sphere, namely, the supply of skilled personnel, market regulation, and competition conditions. Therefore, future work on innovation policies for SMEs should place greater emphasis on the non-financial external framework conditions for firm R&D and innovative activity. [ABSTRACT FROM AUTHOR]

In the past two decades, centres of excellence (CoE) and other 'research excellence initiatives' likely to increase the cumulative advantages and stratification of science, have been implemented in many countries. Based on empirical studies of CoE in four Nordic countries, this paper examines how the resources provided by CoE schemes (generous long-term funding, prestige and visibility) add to the success and growth dynamics of the CoE. The data indicate a modified Matthew effect with ceilings and limits avoiding excessive accumulation of resources. Important impacts of the CoE are found, in particular in terms of enabling more interdisciplinary collaboration and risk-taking and enhancing international recruitment to the research areas involved. But, in contrast to what might be expected, the CoE grant seem to add less to the relative citation rate of those already performing at the highest level, than for those performing at a somewhat lower level prior to the CoE grant. [ABSTRACT FROM AUTHOR]

This paper evaluates how changes in US National Institutes of Health (NIH) funding levels affected US universities' total biomedical R&D efforts, over a period of dramatic change in the federal funding environment. Instrumental variables estimation reveals that during the NIH budget doubling period (1998-2003), each federal dollar that US universities received spurred an additional $0.26 in research support from non-federal sources, with stronger complementarity found among historically less-research-intensive institutions. However, in the more competitive post-doubling environment (2006 onwards), the more research-intensive PhD-granting universities substituted funding from non-federal sources to maintain stable levels of R&D expenditures. In contrast, at non-PhD-granting and historically less-research-intensive institutions, total R&D funding and expenditures declined overall with reduced availability of federal funds. However, the effect of successful federal applications on subsequent non-federal investment remained significant and positive for this latter group, suggesting federal R&D funding may play an important signaling role. [ABSTRACT FROM AUTHOR]

This paper examines the distribution of federal academic research and development (R&D) funding in the context of fiscal federalism in financing academic R&D in the USA. The statistical results suggest that the distribution of federal academic R&D expenditures is primarily determined by states’ research capacity. In addition, a state’s political representation on congressional appropriations committees also has some significant but limited impact on its receipt of federal R&D support. The paper improves our understanding of fiscal federalism in supporting academic R&D in the USA, and provides empirical evidence related to the debate about the geographic distribution of federal funding of academic R&D. [ABSTRACT FROM PUBLISHER]

This paper discusses the controversial management decisions made by policy-makers worldwide regarding poisoning campaigns aimed to control small mammal populations, often considered harmful economic pests. Aside from considerations regarding the biological consequences of these campaigns, we argue that when society rejects all values of science and expertise then only badly supported and negligent decisions will be made about conservation and management issues. The extermination of small mammal species, some of which play crucial ecological roles in several regions of the world, is just an example of such discredit and misinformation. Without a strong commitment towards evidence-based policy-making, economic investments in research and development could be entirely compromised.. [ABSTRACT FROM AUTHOR]