Incorporating innovation subsidies in the CDM framework : empirical evidence from Belgium

This paper integrates innovation input and output effects of R&D subsidies into a modified Crépon–Duguet–Mairesse (CDM) model. Our results largely confirm insights of the input additionality literature, i.e. public subsidies complement private R&D investment. In addition, results point to positive output effects of both purely privately funded and subsidy–induced R&D. Furthermore, we do not find evidence of a premium or discount of subsidy–induced R&D in terms of its marginal contribution on new product sales when compared to purely privately financed R&D.