Economic impacts of public subsidies on young innovating SME’s performances: the case of the French National Competition for creation of New Technology-based Firms

Faced with the technological changes and with the rise of international competition, the competitiveness of firms is based more and more on innovation. In this context, the new innovating firms are regarded as source of competitive dynamism. However, these firms encounter difficulties to finance their activities; it is thus widely acknowledged that there is a need for public support towards these innovating SMEs. In this context, the French government launched in 1999 a National Competition for creation of New Technology-based Firms, which rewards some innovating projects in giving them a financial and managerial support to start and develop their activity. Ten years after the creation of the competition, we propose to evaluate its economic effects: How did the Competition winners grow and survive? We thus analyse the characteristics of the firms that have won the competition and focus our study on the factors of survival of these firms. To undertake our analysis, we use a database from the French ministry of research, composed of the prize-winning firms. This database is merged with the DIANE database, which gives financial information on firms. Our analysis is then based on three categories of indicators to characterise the survival rate and the factors of survival of new firms. We distinguish indicators related to the firms itself, the entrepreneur, and the environment of the firm. Our results show that the firms that won the contest have a higher survival rate than other firms. We also show that the indicators to explain the survival rate are similar to the one found in the literature.