The impact of EU-funded direct subsidies on several dimensions of firm performance in Portugal: 2008-2015

Abstract

This paper assesses the impact of SI QREN – a set of enterprise support mechanisms that were in place in Portugal between 2007 and 2013 – on firm performance. For this purpose, we used an unprecedented set of firm-level information, gathered from different institutional sources. These data allowed to control for several determinants of performance that are usually ignored in similar studies, and to assess the impact of the policy in various dimensions of enterprise performance, including: investment, financial situation, human capital, innovation, internationalization, firm growth, competitiveness, eco-efficiency, job quality, intra-firm income distribution, and gender equality. In order to address the selection bias that is inherent to the policy under analysis we estimated the impacts using the bias corrected matching estimator put forward by Abadie and Imbens (2002, 2011), producing results based on both the Propensity-Score Matching and Malahanobis Distance Matching methods, for robustness purposes. Our results suggest that SI QREN accomplished its main policy goals, as they are identified in the theory of change of the policy. Generally speaking, the impacts of SI QREN remain positive and statistically significant in the mid-term, after the supported projects have been completed. We also find that SI QREN is less effective in inducing additional investment in firms that have easier access to external finance.