סמינר באסטרטגיה

Title: Evaluating Government R&D Grants to Startups: The Case of a Small Open Economy

Abstract (a complete draft can be requested from Dotan or from AnnaMaria at Annamaria.Conti@scheller.gatech.edu):

Government R&D grants for startups are widespread policy instruments to overcome market failures.

These grants generate spillovers that are appropriable by foreign agents.

Small open economies are the most concerned and often impose restrictions on the offshoring of government funded output, increasing foreign investors’ opportunity costs.

Examining Israeli startups, I find that these restrictions act as screening mechanisms inducing startups to reveal their characteristics.

Ex-ante, startups with a high probability of being acquired by foreign companies are deterred from applying for grants.

Ex-post, grant funds positively affect the probability that their recipients experience a successful exit but not the probability that foreign companies acquire them.

Finally, grant recipients receive follow-on financing but not foreign venture capital.