Does Government Support for Private Innovation Matter? Firm-Level Evidence from Turkey and Poland

August 1, 2013

This report seeks to analyze government support for innovation in a comparative perspective by first examining the main existing instruments of financial support for innovation in Turkey and Poland, and secondly to assess their effectiveness by applying recent econometric techniques to firm-level data for both countries obtained from the Community Innovation Survey (CIS). This report finds that government support for private-sector innovation in Turkey and Poland contributes to higher innovation spending by firms and this in turn improves their chances to introduce product innovations.

The evidence indicates that government support contributes to higher innovation spending by firms and this in turn improves their chances to introduce product innovations. The positive impact remains valid even when a possibly non-random selection of firms for government support programmes is controlled for. The extended analysis of Turkey has proved that there is a positive relationship between innovation and firm productivity. On the other hand, substantial differences between various kinds of public aid were identified.