This paper provides evidence that capital market imperfections hold back innovation and growth, and that public policy can complement capital markets. We deliver the evidence by studying the effects of government funding on the behavior of SMEs in Finland. By adapting the methodology recently...

Why is invention strongly positively correlated with parental income not only in the US but also in Finland which displays low income inequality and high social mobility? Using data on 1.45M Finnish individuals and their parents, we find that: (i) the positive association between parental income...

Building on a 1998 study by Rajan and Zingales, this paperexamines the impact of both general and government financial support on privateR&D rates and on firm expansion.A description of the theoreticalbackground for this research is provided with an emphasis on the subsidizationof small- and...