High-tech start-ups, better off with government contracts than with subsidies: new evidence in Canada

Abstract

A study analyzing the relationship between early growth and the type of government support/contract received by a firm at start-up is reported. It is based on the observation of 73 microelectronics and communication high-tech firms founded between 1965 and 1980 in various parts of Canada. The main conclusion is that firms starting as government suppliers do significantly better than firms receiving other types of government support at start-up. These firms tend to be better organized than firms receiving grants or subsidiaries, and they are more export-oriented and generally use technologies and serve markets similar to those of a previous employer. Government contracts for goods and services are more important to the future growth and success of the firms than contracts for R&D and R&D support mechanisms.< <ETX xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">&gt;</ETX>