Does BNDES innovation credit boost firms' R&D expenditures?: evidence from Brazilian panel data

Abstract

We evaluate the effects of BNDES direct credit support for R&D on firms' innovation efforts. We use data from Pesquisa de Inovação (Pintec, IBGE) for the period of 2003-2014, a Brazilian firm-level data set that surveys innovation activities, and BNDES data on credit for innovation over the period 2004-2014, to estimate the effects of credit on firms' R&D Expenditures. We adopt a Fixed Effects (FE) approach to deal with the endogeneity problem associated to the selection of firms that received BNDES innovation credit and estimate the impact of BNDES support. We also use a complementary approach based on the Difference-in-Differences estimator. Our findings show evidence of positive and significant effects of BNDES credit on firms' R&D expenditures for both estimators. Based on FE estimates, we obtain BNDES-supported firms tend to invest at least 30% more on R&D than non-supported companies in the analyzed period.