Instrument policy mix and firm size

Nowadays, a rising number of evaluations investigates a multifaceted concept of the policy mix. Our study specifcally 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 frms, 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-efects probit estimator, we account for the persistence of innovation and endogeneity of public support. The results, that are separately estimated for SMEs and large frms, uniformly show evidence of no interplay between two policy instruments either in SMEs or large frms. However, among factors that infuence the propensity to product and process innovations, by far, the largest efect is generated by true state dependence. These fndings provide some policy implications for fostering product and process innovations in the long run.