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<p>This study investigates the differentiated effects of R&amp;D subsidy types on firm-level innovation additionality in South Korea. Using panel data for the period 2016 to 2024, the analysis distinguishes between direct cost subsidies and personnel-based subsidies, assessing their impacts on input (R&amp;D intensity), output (patent applications), and behavioral (employment growth) additionality. To estimate the effects of R&amp;D subsidies, the study adopts a two-step empirical strategy that combines propensity score matching (PSM) with panel regression. PSM is first used to construct a matched sample of comparable treated and untreated firms, mitigating self-selection based on observable characteristics. Panel regressions on the matched sample then identify the heterogeneous effects of each subsidy type across the three dimensions of additionality. The results confirm that subsidised firms outperform non-subsidised counterparts in R&amp;D investment, patenting, and employment. Panel estimates further reveal marked differences by subsidy type: personnel-based subsidies are consistently associated with higher R&amp;D intensity, more patent applications, and faster employment growth, underscoring their role in fostering organisational learning and innovation capability. By contrast, direct cost subsidies primarily enhance R&amp;D expenditure and incremental patenting but generate limited behavioural change, as their influence on sustained employment expansion remains modest. These findings highlight the need for a balanced policy mix in government-led R&amp;D systems. While direct cost subsidies are useful for delivering short-term technological outputs, personnel-oriented instruments are more effective in promoting deeper organisational transformation and building absorptive capacity. In countries with government-led R&amp;D and innovation systems, the effective alignment of subsidy instrument design and composition with specific dimensions of additionality is a key condition for sustaining technological dynamism and securing employment outcomes.</p>

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R&D subsidy design and innovation additionality: disentangling the mechanisms in South Korea’s innovation system

  • 期刊论文

  • 发表日期：

    2025年12月8日

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  • Sang-Min Park,
  • Ilwon Seo,
  • Taehyuk Kwon,
  • Nicholas Vonortas

摘要

This study investigates the differentiated effects of R&D subsidy types on firm-level innovation additionality in South Korea. Using panel data for the period 2016 to 2024, the analysis distinguishes between direct cost subsidies and personnel-based subsidies, assessing their impacts on input (R&D intensity), output (patent applications), and behavioral (employment growth) additionality. To estimate the effects of R&D subsidies, the study adopts a two-step empirical strategy that combines propensity score matching (PSM) with panel regression. PSM is first used to construct a matched sample of comparable treated and untreated firms, mitigating self-selection based on observable characteristics. Panel regressions on the matched sample then identify the heterogeneous effects of each subsidy type across the three dimensions of additionality. The results confirm that subsidised firms outperform non-subsidised counterparts in R&D investment, patenting, and employment. Panel estimates further reveal marked differences by subsidy type: personnel-based subsidies are consistently associated with higher R&D intensity, more patent applications, and faster employment growth, underscoring their role in fostering organisational learning and innovation capability. By contrast, direct cost subsidies primarily enhance R&D expenditure and incremental patenting but generate limited behavioural change, as their influence on sustained employment expansion remains modest. These findings highlight the need for a balanced policy mix in government-led R&D systems. While direct cost subsidies are useful for delivering short-term technological outputs, personnel-oriented instruments are more effective in promoting deeper organisational transformation and building absorptive capacity. In countries with government-led R&D and innovation systems, the effective alignment of subsidy instrument design and composition with specific dimensions of additionality is a key condition for sustaining technological dynamism and securing employment outcomes.