Does government support for private innovation matter? Firm-level evidence from two catching-up countries

Abstract Turkey and Poland are two technology-follower countries that represent a similar level of economic development. In recent years the governments in both countries sought to improve the innovation performance of companies by increasingly offering grants for innovation activities. We analyze the institutional frameworks in which these policies were formulated and implemented, and we assess their efficiency by looking at data from the 2010 innovation surveys. We find that government aid for R&D activities contributed to better innovation performance by firms in both countries. By contrast, EU-funded grants for physical and human capital upgrading in Poland were inefficient in fostering innovation; in fact they may have actually impeded it. Policy conclusions for what we call “technology-follower countries with relatively well-developed institutions” are suggested.