Scandinavian Working Papers in Economics

Papers in Innovation Studies,
Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy

No 2018/7: Do Companies Benefit from Public Research Organizations? The Impact of the Fraunhofer Society in Germany

Diego Comin (), Georg Licht (), Maikel Pellens () and Torben Schubert ()
Additional contact information
Diego Comin: Dartmouth College & CEPR, Postal: USA/UK
Georg Licht: ZEW, Postal: Germany
Maikel Pellens: ZEW & KU Leuven, Postal: Germany/Belgium
Torben Schubert: CIRCLE & Fraunhofer ISI, Postal: Sweden/Germany

Abstract: Among available policy levers to boost innovation, investment in applied research organisations has received the least attention. In this paper, we analyze the case of the Fraunhofer Society, the largest public applied research organization in Germany. We analyze whether project interaction with Fraunhofer affect the performance and strategic orientation of firms. To that end, we assemble a unique dataset based on the confidential Fraunhofer-internal project management system and merge it with the German contribution to the Community Innovation Survey (CIS), which contains panel information on firm performance. Using instrumental variables that exploit the scale heteroscedasticity of the independent variable (Lewbel, 2012), we identify the causal effects of Fraunhofer interactions on firm performance and strategies. We find a strong, positive effect of project interaction on turnover and productivity growth. We also provide evidence that a major driver of the positive performance effects is the firms increased share of sales from new products and an increase in the share of workers with tertiary education. More detailed analyses reveal, amongst others that the performance effects become stronger the more often firms interact with Fraunhofer and that interactions aiming at generation of technology have a stronger effect than interactions aiming merely at the implementation of existing technologies.

Keywords: Innovation; R&D; diffusion; applied research; Fraunhofer

JEL-codes: O33; O38

41 pages, March 7, 2018

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