The effect of public support on R&D employment in small firms

Between 2003 and 2010, total R&D public support (tax incentives and subsidies) targeted at SMEs increased by more than 300%: in 2010 it amounted to almost 2 billion euros, of which 26% (nearly 500 million euros) were perceived by very small businesses (fewer than 10 employees). This sharp increase is mainly explained by two reforms of the R&D tax credit (in 2004 and 2008) and a new public program dedicated to young innovative enterprises launched in 2004. An aggregate analysis shows that the share of R&D personnel financed by public funding has been multiplied by four for very small businesses, from 14% in 2003 to 49% in 2010. This change was accompanied by a decline of privately funded R&D personnel employed by very small businesses (and other SMEs to a lesser extent). An econometric analysis of a panel of small firms active in R&D intensive sectors tends to confirm this agregate finding at the firm level: R&D public support appears to have a positive impact on highly qualified and R&D employment but the impact on the associated labor costs appears to be significantly lower than the increase of the public financing, particularly from 2008.