Fostering Innovation Activities with the Support of a Development Bank: Evidence from Brazil 2003–2011

I evaluate the impact of the Banco Nacional de Desenvolvimento Econômico e Social (BNDES) disbursements on R&D intensity of companies operating in the Brazilian manufacturing sector for the period of 2003–2011. Using instrumental variable (IV) technique, I find a crowding-in impact of receiving funding from BNDES on business-funded innovation intensity, resulting in an increased commitment in innovation activities for funded Brazilian manufacturing companies. The findings of this analysis provide new evidence regarding the industrial sector activity of the Brazilian development bank, adding on the debate about additionality/substitutability of public financial resources.