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IZA Discussion Paper No. 15779
December 2022
Investment Grants and Firms' Productivity: How Effective Is a Grant Booster Shot?

published in: Small Business Economics, 2025, 64, 1601–1641

This paper investigates the effect of awarding a second investment grant to the same firm. We implement a Regression Discontinuity Design strategy using a very rich firm-level administrative database, which allows us to link applications to grants and their scores to firms' performance. Overall, our results show a positive and significant impact of an investment grant booster shot on firms' labour productivity. This effect is significantly larger than the effect of a single grant. A more granular analysis shows a strong impact of awarding a second grant to small-sized firms. However, we found no effect on micro, medium and large-sized firms. Our results suggest that the characteristics of the targeted firms, namely firm size, matter for the effectiveness of awarding a second grant to the same firm.

Communications
Mark Fallak
mark.fallak@liser.lu
+352 585-855-526
World of Labour
Olga Nottmeyer
olga.nottmeyer@liser.lu
+352 585-855-501
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Christina Gathmann
christina.gathmann@liser.lu

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