Public support to firm level innovation: an evaluation of the FONTEC Program

Latin American Governments have frequently adopted Technology Development Funds (TDF) to provide financial support for innovation activities of firms. In this paper, we analyzed the effectiveness of a Chilean TDF, the FONTEC program. We found that FONTEC's subsidies increased firm innovation investments in intangible assets (in particular R&D) and they also improved the linkages among actors in the innovation system. However, although we did not find any evidence of crowding-out effects, neither did we find any evidence of the leveraging of private financing for innovation (crowding-in). In terms of output additionality, FONTEC did significantly increase the employment and productivity of beneficiary firms. The findings with regards to skills are more mixed, but this could be affected by the poor quality of the skills variable in the survey.