The Additionality Effects of Government Subsidies onR&D and Innovation Activities in the Aviation Industry - A Project Level Analysis

The importance of innovation for organizations and for the economy overall, is commonly accepted by researchers as well as by practitioners. However, conducting innovation and R&D projects is not risk-free and does not necessarily result in the intended findings. As a consequence, many innovation projects suffer from market failures which lead to an underinvestment in R&D and innovation. This underinvestment is not desirable from an economical point of view, since many innovative capacities are unused and do not deliver socially desirable outcomes. In order to increase the private investment, governmental subsidies are used in most western and industrialized countries. The intensified use of governmental subsidies emphasized the need for adequate evaluation tools in order to assess the effectiveness of those subsidies. This research has been conducted at a major European airline group and is aimed at exploring the particular impact of governmental subsidies on publically-funded R&D and innovation projects. The particular impact of public funding on the projects is assessed by using the concept of additionality, which is a common method to evaluate the effectiveness of public policy programs. Various R&D and innovation projects are conducted frequently within the airline group in order to stay technologically and economically competitive. The participation in publically-funded innovation programs however, is a rather new venture for the airline. As a consequence, no centralized and synergized knowledge about the impact of public funding on the organization does exist, which can be considered as a knowledge problem. This study is an attempt to contribute to the solution of this knowledge problem by analyzing how the public funding influences the particular projects. To address this knowledge problem, the following research question has been established: What is the impact of governmental subsidies on the case companies R&D and innovation activities in terms of additionality effects at the project level? The concept of additionality is designed to assess the difference which is made by governmentally-sponsored programs. Additionality effects are typically evaluated by the use of the traditional concepts of input additionality and output additionality. Input additionality is commonly used to assess the allocation of private and public funding, while output additionality is used to evaluate the innovative output of the subsidized projects. In addition to those two concepts, the concept of behavioral additionality is used to assess how the public funding influences the organizations behavior when receiving governmental support. Various different manifestations of behavioral additionality exist, in order to fully assess the behavioral changes of organizations. In order to answer this research question and to assess the additionality effects, a qualitative, cross-sectional research has been conducted. A total of 16 interview sessions with 18 project managers of the airline group, who conducted at least one subsidized R&D project, have been held, in order to assess the additionality effects of a total of 18 projects.