Dynamic complementarities in the policy instrument mix for innovation: a firm-level evaluation using panel data

Achieving policy goals often depends crucially on the interactions and interdependencies between different science and innovation policy instruments within a broad policy mix. This paper examines the complex and dynamic impacts of the policy mix of science and innovation policy instruments available to firms in Ireland. Combining the Annual Business Survey of Economic Impact (ABSEI) with administrative data from Enterprise Ireland (EI), IDA Ireland (IDA), and Science Foundation Ireland (SFI), we apply a formal test for the presence of complementarities in the joint use R&D tax credits and direct EI or IDA innovation subsidies or SFI collaborations at the firm-level. In static terms we find no evidence of complementarity, but in dynamic terms we find strong evidence that adding EI or IDA subsidies or SFI collaborations to firms already receiving R&D tax credits promotes complementarity. Adding R&D tax credits to firms already receiving EI or IDA subsidies has no effect. Interaction effects between SFI collaborations and R&D tax credits differ significantly to interaction effects between EI or IDA subsidies and R&D tax credits. These findings highlight the importance of taking a policy mix approach to impact evaluation, which distinguishes between different kinds of policy instrument interaction and highlights the potential for complementarities and tensions within these interactions.