An impact evaluation of a fund to finance innovation in SMEs

Abstract

Purpose – The purpose of this paper is to estimate the impact of one productive development program (PROPYME) in a developing nation like Costa Rica. This program seeks to increase the capacity of small and medium-sized firms (SMEs) to innovate. Design/methodology/approach – Impacts have been estimated assuming that beneficiary firms are trying to maximize their profits and that PROPYME aims to increase these firms productivity. The impacts were measured in terms of three result variables real average wages employment demand and the probability of exporting. A combination of fixed effects and propensity score matching techniques was used in estimations to correct for any selection bias. The authors worked with panel data companies treated and untreated for the period 2001-2011. Findings – PROPYME’s beneficiaries performed better than other firms in terms of labor demand and their probability of exporting. In addition, the dose and the duration of the effects of the treatment (timing effects) are important. Originality/value – The authors study the impact in ways that go beyond the average treatment effects on the treated (ATT) usually estimated in the existing literature. Specifically, the research focusses on the identification of the timing or dynamic effects (i.e. how long should we wait to see results?) and treatment intensity (dosage effects). Keywords Impact evaluation, Innovation, Financing, Probability of exporting, Labour demand, R&D, SMEs, Costa Rica Paper type Research paper