2020

Subsidy Entrepreneurs: An Inquiry into Firms Seeking Public Grants

Reprint No. 2020:59

Author(s): Anders Kärnä, Patrik Gustavsson Tingvall and Daniel HalvarssonYear: 2020 Title: Journal of Industry, Competition and Trade Volume (No.): 20 (3) Pages: 439–478
Online article (restrictions may apply)

Subsidy Entrepreneurs: An Inquiry into Firms Seeking Public Grants Anders Kärnä, Patrik Gustavsson Tingvall and Daniel Halvarsson


This paper studies the incentives and characteristics of firms that apply for, and eventually receive, one or multiple governmental grants intended to stimulate innovation and growth. The analysis departs from a contest model in which entrepreneurs are free to allocate their effort between production and seeking grants. The results suggest that highly productive entrepreneurs abstain from seeking grants, moderately productive firms allocate a share of their effort to grant seeking, and low-productivity firms allocate most resources to seeking grants. Due to their efforts in seeking grants, these low-productive subsidy entrepreneurs also have a relatively high probability of receiving the grants. Using comprehensive data over grants from the three largest grant-distributing agencies in Sweden, we find concordant evidence of a negative relation between the probability of receiving a grant and firm productivity. As we go from single- to multiple-grant-supported firms, this negative relation becomes more pronounced.


Reference:
Kärnä, Anders, Patrik Gustavsson Tingvall and Daniel Halvarsson (2020), "Subsidy Entrepreneurs: An Inquiry into Firms Seeking Public Grants". Journal of Industry, Competition and Trade 20(3), 439–478.

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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