European cooperative R&D and firm performance

The goal of this paper is to assess the impact on the performance of firms that participate in Research Joint Ventures (RJVs) funded by the Fifth European Framework Programme for Research and Technological Development (EU-FP5). A special emphasis is made on the User-friendly Information Society (IST) programme, one of the most important thematic programmes of the EU-FP5. We use the funding available to the firms as an instrumental variable to account for self-selection and estimate the Local Average Treatment Effect (LATE) of participation by considering labor productivity and profit margin as performance measures. Our results show a large and positive impact of participation on the labor productivity of the firms, whereas the effect on profit margin is weaker. When taking into account the size of the RJV, we find that the positive impact on labor productivity comes mainly from participation in large projects and that participation in smaller RJVs has a negative effect on the profit margin