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Market-Based Solutions to Vital Economic Issues


Kenan Institute 2024 Grand Challenge: Business Resilience
Market-Based Solutions to Vital Economic Issues
Oct 20, 2017

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


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 the Heckman (Econometrica 47(1):153–161, 1979) research design to control for inherent pre-award differences between awarded and non-awarded firms. By using administrative data on reviewer scores, this analysis shows that the impact of ATP on small firm survival is robust to sample selection. This paper’s findings suggest that receiving an ATP award can have a significant and positive causal effect on firm survival.

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