Enterprise Support - an exploratory study using counterfactual methods on available data from Germany

This study compared enterprises in Eastern Germany which benefited from investment or research grants with similar, but unsupported, enterprises. There were two specific samples: the IAB Betriebspanel for enterprise support and Gefra's survey of enterprise R&D in Thuringia. To ensure robust results, various comparison methods were used (including propensity score matching, controlled difference in difference and instrumental variables).Main findings:

• Investment grants induced strong investment effects. Average public support of €8,000 per employee led to €11,000-12,000 of extra investment. This implies a leverage effect, where every euro of public money generates up to €1.5 of total investment.
• R&D grants of €8,000 led to an additional €8,000 of investment. Although this 1-to-1 ratio is a little smaller than that for investment grants, it has an additional "spillover" benefit in terms of increased long term regional economic growth.
• A rough calculation of the direct employment effect from investment grants was some 27,000 extra jobs. While positive, this is lower than figures derived from monitoring data, suggesting that the main impact of such support is increased investment and productivity, with job creation a secondary impact.