Does Cluster Policy Trigger R&D Activity? Evidence from German Biotech Contests

This article evaluates the research and development (R&D) enhancing effects of two large public grant schemes for the German biotechnology industry (BioRegio and BioProfile). Both grant schemes are organized in the form of contents for cooperation and aimed at fostering the performance of innovative firms by their organization in research clusters. We apply a difference-in-differences estimation technique in a generalized linear model framework, which allows us to control for different initial regional conditions in R&D activity of the biotech sector. Our econometric findings support the view that winners generally outperform non-winning participants during the treatment period, thus indicating that exclusive funding as well as the stimulating effect of being a "winner" have positive effects on R&D activity in the short-term. Apart from this direct winner effect, for the non-winning participants no beneficial indirect effect due to a mobilization of local actors during the application phase could be detected. Finally, first attempts in estimating the long-term effects of the contests for cooperation approach on the winner regions' R&D activity in the post-treatment period show ambiguous results.