Abstract

Nowadays, a rising number of evaluations investigates a multifaceted concept of the policy
mix. Our study specifically focuses on the mix of two most frequently used supply-side
instruments–R&D subsidies and R&D tax credits. Drawing on the longitudinal sample of
Spanish manufacturing firms, we investigate whether there is a complementary interaction
between these policy instruments with respect to product and process innovations. Moreover,
by employing a dynamic random-effects probit estimator, we account for the persistence
of innovation and endogeneity of public support. The results, that are separately
estimated for SMEs and large firms, uniformly show evidence of no interplay between two
policy instruments either in SMEs or large firms. However, among factors that influence
the propensity to product and process innovations, by far, the largest effect is generated by
true state dependence. These findings provide some policy implications for fostering product
and process innovations in the long run.