Abstract:

This study is intended to demonstrate how different factors induce the Korean government’s direct investment in research and development according to the type of business enterprise in Korea.

We analyzed that what factors made the government directly invest in research and development by using a total of 18,272 company panel data, which are not limited to specific industries or government-led research and development (R&D) programs.

The results showed that the direct investment for R&D by the government led to the increase in the number of researchers in SMEs. For major companies, the direct investment resulted in the increase of sales and company's own R&D expenses. Moreover, this study found that government's direct support for R&D even led to the decrease of SMEs' own R&D expenses; however, this result was not statistically significant. In addition, the most significant factor to increase both SMEs' and major company's own R&D expenses was the sales amount of the company, rather than government's direct investment for R&D. The factor that increases sales was the company's own R&D expenses, rather than government's direct investment for R&D.

Through the analysis using Mixed Effects Model, this study suggested the policy should be changed to make SMEs invest in its own R&D expenses, rather than to secure researchers of SMEs by government's direct investment for R&D.

Keywords:

SMEs, Research and Development, Government’s R&D investment, R&D effect, pull factor, substitute factor.