Two birds with one stone: can public financial support help firms to address financial and non-financial obstacles to research and innovation?

Financial, knowledge and market obstacles can restrict firm-level research and innovation (R&I). Public financial support for R&I can clearly help firms that face financial obstacles to invest in R&I. Building on the literature concerning the learning effects of public financial support for R&I, and using a novel combination of administrative and innovation-survey data, we demonstrate for the first time, that such public financial support also results in more R&I in firms that face knowledge and market obstacles. Despite this, however, public financial support for R&I does not reduce the importance that firms attach to their financial and knowledge obstacles. Moreover, it increases the importance that firms attach to their market obstacles. This suggests that while effective at helping firms to increase their R&I activities, addressing firms’ financial and non-financial obstacles may require additional policy interventions, alongside public financial support for R&I. Our study offers novel insights for theory and policy.