Impact of low-interest credits on business R&D expenditures: Spanish firms and CDTI loans for R&D projects

Our objective is to estimate the effect of low-interest loans for R&D projects on business R&D. We take into account that the participation of firms in this kind of public programme probably depends on the same characteristics that determine their investment decisions. We also consider the possibility of persistence in R&D expenditures over time. The estimations provide evidence of the effectiveness of low-interest loans, being the stimulus effect larger for SMEs than for large firms and also higher for manufacturing than for services. Participants are approximately 25 percentage points more likely to self-finance their R&D investments than non-supported firms. The effect is quite relevant if we consider that the probability of self-financing R&D activities is 53.2 percentage points higher when the firm has invested in R&D activities in the previous year. This result suggests that firms can be induced persistently to perform R&D activities by means of loans.