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R&D subsidies in permissive and restrictive environment: Evidence from Korea
Affiliation:1. Brandeis University, United States of America;2. Pace University, United States of America;3. Motu Economic and Public Policy Research, New Zealand;4. Queensland University of Technology, Australia;1. Manchester Institute of Innovation Research, Alliance Manchester Business School, University of Manchester, United Kingdom;2. SYNBIOCHEM, Manchester Institute of Biotechnology, University of Manchester, United Kingdom;3. Department of Sociology, University of Manchester, United Kingdom;4. School of Public Policy, Georgia Institute of Technology, United States;5. SKEMA Business School, Université Côte D''Azur, France;1. Eindhoven University of Technology, Eindhoven, Netherlands;2. MIT Sloan School of Management, Cambridge, MA, United States;3. National Bureau of Economic Research, Cambridge, MA, United States;4. Scuola Superiore Sant''Anna, Pisa, Italy;5. Department of Economics and Business, Universitat Pompeu Fabra, Barcelona, Spain;6. UPF Barcelona School of Management, Barcelona, Spain;7. Barcelona School of Economics, Barcelona, Spain;8. Boston University, Questrom School of Business, Boston, MA, United States;1. Harvard University, United States of America;2. University of Massachusetts Amherst, United States of America;3. School of Economics, University of Bristol, United Kingdom of Great Britain and Northern Ireland;4. University of Bath, United Kingdom of Great Britain and Northern Ireland;1. Ahmedabad University, India;2. Indian Institute of Management, Ahmedabad, India;3. University of Sussex, Hoover Institution, Stanford University, & Indian Institute of Management, Ahmedabad, India;4. University of Utah, Max Planck Institute for Innovation and Competition & NBER, United States of America;1. Foundation Professor of Public Policy and Management, School of Public Affairs, Global Center for Technology Transfer, Arizona State University, United States of America;2. Professor of Open & Collaborative Innovation, Eindhoven University of Technology, Netherlands;3. Innovation & Entrepreneurship, University of Copenhagen, Denmark;4. University of California, Berkeley, United States of America;5. Graham Professor of Strategy and Organization, Alberta School of Business, University of Alberta, Canada;6. Distinguished Chair Professor, School of Public Policy and Management, Schwarzman College, Tsinghua University, China
Abstract:This paper investigates the extent to which a regulatory environment for R&D subsidies shapes the magnitude and direction of R&D subsidies set by a government and consequent innovation paths. When the WTO adopted a permissive regulatory environment, we find that the Korean government increased R&D subsidies significantly (89.21%) and selectively so for firms and industries with higher returns. Recipient firms conducted less basic research and more development research. Improvements in innovations were mostly incremental and minor. However, such changes did not persist once the WTO switched to a restrictive regulatory environment. Our findings show that the regulatory environment imposed by the WTO largely affects allocation of R&D subsidies and suggest that a permissive regulatory environment may not necessarily maximize the potential for breakthrough innovations.
Keywords:R&D subsidy  Regulatory environment  WTO subsidy rules  Innovations  Patent  Utility model
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