Public Subsidies and Firm Innovation in Latin America: A Non-Parametric Assessment of Policy Effectiveness
This study examines the impact of public grants on firms’ innovation expenditures using a large sample of Latin American firms. The methodology is based on the non-parametric matching procedure. The results indicate that public incentives have a positive and statistically significant effect on firms’ innovation spending. However, public grants do not boost additional net innovation spending. This may reflect the general structural weakness in Latin America's technological system, where complex relationships involving complementarities and synergies, typically found in the technological field, are not entirely fulfilled. Moreover, companies that utilize government funds tend to finance innovation by using their own financial resources more than non-granted companies. Although the data do not allow for identifying potential substitution effects, the analysis suggests that, without the grants, these firms would have been possibly less committed to innovation. This finding supports the idea of partial positive effects of public support on firms’ innovative activities.
Copyright© 2026 The Author(s). This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited.
Article’s history: Received 23rd of November, 2025; Revised 13th of February, 2025; Accepted 1st of March, 2026; Available online: 15th of March, 2026. Published as article in the Volume XXI, Special Issue, 1(91), 2026.
Carboni, O. (2026). Public Subsidies and Firm Innovation in Latin America: A Non-Parametric Assessment of Policy Effectiveness. Journal of Applied Economic Sciences, Volume XXI, Special Issue, 1(91), 115 – 136. https://doi.org/10.57017/jaes.v21.si.1(91).06
Acknowledgments/Funding: We wish to thank the University of Sassari ‘Fondo di Ateneo per la Ricerca’, the Disea ‘Fondo Dipartimento di Eccellenza’, the ‘Progetto APEGADRUS’, and the ‘Fondazione di Sardegna’ for financial support. All the usual disclaimers apply.
Conflict of Interest Statement: The author declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.
Data Availability Statement: The data that support the findings of this study are taken from The Harmonized Latin American Innovation Surveys Database (LAIS), an extensive regional innovation policy (Crespi et al., 2022). Data are openly available at: https://data.iadb.org/dataset/harmonized-latin-american-innovation-surveys-database-lais-firm-level-micro.
Ethical Approval Statement: This study was conducted in accordance with recognized standards of academic research ethics. The analysis relies exclusively on secondary data obtained from the Harmonized Latin American Innovation Surveys (LAIS) database provided by the Inter-American Development Bank. The dataset contains anonymised firm-level information and does not include personal or identifiable data. Consequently, no human participants were directly involved in the research and formal ethical approval was not required. All data were used solely for academic purposes and in compliance with principles of transparency, responsible data use, and proper source citation.
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