Are Applying for and Receiving Subsidy Worth for Small Enterprises? Evidence from the Government Support Program in Japan

This paper examines the effects of the Business Sustainable Subsidy (BSS) on small enterprises' productivity. The BSS aims productivity improvement and sustainable development of small enterprises by aiding a part of expenses for their business activities. We use rich firm data which contains the attributes and the accounting information of both applied and non-applied firms and examine the effects of receiving and applying for the subsidies. We employ sharp regression discontinuity design for the effects of reception and difference in differences design for that of application. Our empirical results show that significant differences in small enterprises' performance improvement were not evident between receiving the subsidies and not. On the other hand, we found that applicant small enterprises perform higher productivity and sales growth than not-applicant firms. We also robustly obtain the positive results of application impacts by difference in differences model with propensity score matching, controlling for preintervention levels and trends in the outcome. Our findings imply that application in itself promotes firms' voluntarily activities to their own business issues through external support, and leads to improve their productivity.

Published: Takahashi, Kohei, and Yuki Hashimoto, 2023. "Small grant subsidy application effects on productivity improvement: Evidence from Japanese SMEs," Small Business Economics, Volume 60, Issue 4 (2023), 1631-1658.
https://doi.org/10.1007/s11187-022-00663-0