Economics of Innovation at TUM

Our research in the area of applied microeconomics focuses on the economics of innovation and the economics of science.

Research News

Research on the effectiveness of public subsidies for start-ups forthcoming in "Research Policy"

Publikationen |


New knowledge-intensive firms contribute to innovation, competition, and employment growth, but externalities like knowledge spillovers can prevent entrepreneurs from appropriating the full returns from their investments. In addition, uncertainty and information asymmetry pose challenges for financing. Public policy programs therefore aim to support start-ups. This study evaluates the effects of participation in such programs on the performance of start-ups in high-tech and knowledge-intensive sectors that were founded in Germany between 2005 and 2012. Distinguishing between grants and subsidized loans and after matching recipients and non-recipients based on a broad set of founder and company characteristics, we find that both grants and subsidized loans facilitate tangible investment, employment and revenue growth. Grants are, however, better suited to increasing R&D investments than loans are. Combined with grants, subsidized loans facilitate turning research results into marketable products by means of investments in tangible assets. Start-ups that participate in both types of programs outperform grant-only recipients in terms of innovation performance, employment and future revenues. Finally, program participation does not crowd out private venture capital.


Recent Publications (click to see all publications)

Abstract #1: Investment in innovation is characterized by uncertain and often intangible outcomes, knowledge spillovers as well as information asymmetries between managers vis-à-vis lenders and investors. These properties affect the financing of innovation. Financing constraints occur when firms' innovation activities are affected negatively by the lack of internal financing and constrained access to external financing, including high cost of debt or a shortage of equity. The extent to which a firm's innovation activities are affected by…

Abstract: Green start-ups play a vital role in the needed transition towards more environmentally sustainable economies. Yet our understanding of why some founders start green ventures and others do not remains incomplete. We build on the cognitive and decision-making perspectives on start-ups pro-environmental engagement to shed light on the role of founders’ personality traits - focusing on the ‘Big 5’ and risk tolerance - in explaining whether founders’ start new ventures with environmentally friendly products. Our analysis of a large,…

Abstract: Corporate research and development constitutes one of the main sources of innovation. Recent research, however, discusses a decline in corporate research and its implications for technological progress. The contribution of this study is to model research & development (R&D) decisions in an R&D investment model that allows the analysis of firms’ engagement in research (R) as compared to development (D) activities. The model predicts higher investments in both activities for larger firms, but it also shows that research intensity, i.e.…

Abstract: Multiple institutional affiliations occur when an academic belongs to more than one organisation. Recent research shows an increase in multiple affiliations, but evidence on roles and motivations is mainly anecdotal. We develop in this study a typology of co-affiliations which identifies four types based on their purpose and origin. We draw on results from a unique international survey on academics in three major science nations (the UK, Germany and Japan) to study the different drivers for the four types of co-affiliations. The…

Abstract: Research suggests that public subsidies for newly founded firms have a positive effect on follow-on financing, in particular on Venture Capital (VC), through providing certification and early-stage liquidity. This study shows that the various sources of VC value public start-up subsidies differently. It is the first to differentiate between distinct types of investors who pursue different investment strategies. We show for a large sample of knowledge-intensive start-ups that there is indeed a correlation between subsidies and all…

Abstract: This study investigates the effect of competitive project-funding on researchers' publication outputs. Using detailed information on applicants at the Swiss National Science Foundation  and their proposal evaluations, we employ a case-control design that accounts for individual heterogeneity of researchers and selection into treatment (e.g. funding). We estimate the impact of grant award on a set of output indicators measuring the creation of new research results (the number of peer-reviewed articles), its relevance (number of…

Abstract This study provides the first systematic, international, large‐scale evidence on the extent and nature of multiple institutional affiliations on journal publications. Studying more than 15 million authors and 22 million articles from 40 countries we document that: In 2019, almost one in three articles was (co‐)authored by authors with multiple affiliations and the share of authors with multiple affiliations increased from around 10% to 16% since 1996. The growth of multiple affiliations is prevalent in all fields and it is stronger in…