Regional R&D Subsidies Bridge Innovation Gap in Southern Italy

Banca d'Italia published Working Paper No. 1526 by Antonio Veronico analysing Puglia's 2008 regional R&D incentive programme, which allocated nearly 50 million euros to SMEs during 2007-2013. The empirical analysis, using firm balance sheets and regional payment data, finds that recipient firms tripled intangible fixed assets and increased average headcount by about one-third (12 additional workers per firm). No significant effects were observed on tangible fixed assets or labour productivity.

The findings are relevant for regional policymakers designing innovation incentives: while subsidies demonstrably increased intangible investment and employment in recipient firms, the absence of productivity effects raises questions about the efficiency of this type of subsidy as a policy tool. Italian regional authorities and EU innovation programme administrators may find the methodology and results instructive for evaluating similar future interventions in less-developed regions.