When Daces Bite Deeper than Sharks – Does the SMEs Public Subsidy Dose Matter?

Abstract

One of the EU's main priorities is to boost the competitiveness of its member states through subsidies from the European Structural Funds. As SMEs are key elements of competitiveness, their support through various subsidy programmes is important. However, as our research shows, the distribution of funds among SMEs is highly unequal. While some SMEs are very successful in obtaining subsidies, others (especially the smallest ones) are not. Using a robust dataset of Czech companies, we have identified subsidy ‘sharks‘ receiving multiple times more funds, compared to mediocre ‘salmons‘ and lowly supported ‘daces‘. While using counterfactual design with control for a subsidy dose and taking labour productivity as a proxy for competitiveness, we have found out that the subsidy dose really matters. It seems that the higher the dose, the lower the impact on competitiveness. Since, on average, subsidies led to higher competitiveness of beneficiaries, the subsidy daces significantly outpaced sharks. From a policy perspective, limiting support per beneficiary could lead to higher effectiveness of support programmes. This study also highlights the importance of the subsidy dose in evaluation practice and research.