Innovation and research policies: two case studies of R&D subsidies

There is plenty of evidence for market failures that motivate government intervention for innovation in general and research and development (R&D) in particular. R&D subsidies are a policy tool of major importance - both in theory and practice. The empirical evidence for the effectiveness of R&D subsidies is mixed, with some studies finding them effective and others concluding the opposite. In part this could be because methodological problems plague the literature. Finland and Norway have relied extensively on R&D subsidies in their innovation policy, yet Finland seems to have succeeded where Norway has failed. A comparison of the countries suggests that the difference may be due to the more horizontal nature and implementation of Finnish R&D subsidy policy with regard to both firms and industries, but the Norwegian failure may also be due to a shift in the technological regime.