The Longer Term Effects of Federal Subsidies on Firm Survival: Evidence from the Advanced Technology Program

Abstract: The goal of this paper is to conduct a survival analysis to determine the causal impact of federal R&D subsidies on firms’ long-term survival. The data are small firms which applied to the Advanced Technology... [ view full abstract ]

Abstract: The goal of this paper is to conduct a survival analysis to determine the causal impact of federal R&D subsidies on firms’ long-term survival. The data are small firms which applied to the Advanced Technology Program (ATP) in 1998 and 2000. The ATP’s focus was on ensuring that early stage, high-risk research was eventually commercialized successfully and resulted in broad economic benefits for society overall. This paper therefore explores whether the knowledge and benefits the ATP initially provided to a firm allowed it to more successfully transition future research projects from development and testing to commercialization. This paper utilizes a variant of Heckman’s (1979) research design to control for inherent pre-award differences between awarded and non-awarded firms. Data on one of the numeric sub-scores assigned to both awarded and non-awarded ATP proposals by the agency in charge of allocating ATP funding is employed to facilitate this design. The paper finds that receiving an ATP did have a significant and positive causal effect on firm survival.