Subsidising innovation outside or within firms’ existing knowledge bases: which is best for radical innovation?

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dc.contributor.authorPerez-Alaniz, Mauricioen
dc.contributor.authorLenihan, Helenaen
dc.contributor.authorDoran, Justinen
dc.contributor.authorRammer, Christianen
dc.contributor.funderResearch Irelanden
dc.date.accessioned2025-04-30T08:44:41Z
dc.date.available2025-04-30T08:44:41Z
dc.date.issued2025en
dc.description.abstractPublic financial support for firm-level Research and Innovation (R&I) can generate important socio-economic returns. This is especially true if firms use this support to develop radical innovation, defined as new-to-market goods and services. However, radical innovation is risky, and prone to failure. Therefore, subsidising radical innovation can also generate sub-optimal socio-economic returns (i.e. policy failure). Understanding how public funding for R&I can be allocated in a way that encourages radical innovation, while avoiding policy failure is crucial. Our paper investigates whether public funding for R&I generates more radical innovation in firms seeking to exploit their existing knowledge base, versus firms seeking to innovate by engaging in knowledge areas that are new to them. We make this distinction using a novel approach, based on the knowledge challenges that firms face when innovating. By merging firm-level survey data with administrative data on public funding for R&I in Ireland, we find that subsidising firms seeking to engage in new knowledge areas, can result in more radical innovation and turnover from radical innovation, compared to firms seeking to exploit their existing knowledge base. These are critical insights from theoretical and policymaking perspectives, regarding the allocation of public funding for R&I.en
dc.description.sponsorshipResearch Ireland (17/SPR/5328)en
dc.description.statusPeer revieweden
dc.description.versionPublished Versionen
dc.format.mimetypeapplication/pdfen
dc.identifier.citationPerez-Alaniz, M., Lenihan, H., Doran, J. and Rammer, C. (2025) 'Subsidising innovation outside or within firms’ existing knowledge bases: which is best for radical innovation?', Economics of Innovation and New Technology, pp.1-29. DOI: 10.1080/10438599.2025.2486324en
dc.identifier.doi10.1080/10438599.2025.2486324en
dc.identifier.issn10438599en
dc.identifier.journaltitleEconomics of Innovation and New Technologyen
dc.identifier.urihttps://hdl.handle.net/10468/17360
dc.language.isoenen
dc.publisherRoutledgeen
dc.relation.project17/SPR/5328
dc.rights© 2025, the Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/),which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.en
dc.rights.urihttps://creativecommons.org/licenses/by/4.0/
dc.subjectAdditionalityen
dc.subjectKnowledge baseen
dc.subjectPolicy failureen
dc.subjectPublic financial support for R&Ien
dc.subjectRadical innovationen
dc.subject~Economics - Journal Articles~en
dc.titleSubsidising innovation outside or within firms’ existing knowledge bases: which is best for radical innovation?en
dc.typeArticle (peer reviewed)en
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