While public intervention in Research and Development (R&D) is generally supported by economic theory and R&D subsidies are being implemented in most OECD countries, evidence on their effectiveness fails to reveal conclusive results. Exploring data from approved and rejected applicants to two R&D funding instruments in Portugal, we provide further evidence on R&D subsidy programmes directed to firms and S&T organisations, by identifying the determinants of grant decisions by the public agency. The results show that subsidies to firms are mainly aimed at large R&D projects by manufacturing firms, in both high- and low-technology sectors. Subsidies to S&T organisations show a higher degree of selectivity, targeting mainly universities and premium public research centres, and favouring R&D projects in exact sciences and engineering and cooperation projects. The subsidy allocation process in Portugal presents distinctive features in line with its status of an innovation follower country.

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