This paper analyzed balanced firm-level panel data for the years 1991-1999 in order to examine the dynamic effects of government-supported R&D subsidies on privately invested R&D expenditures in the Hsinchu Science-based Industrial Park in Taiwan. The results indicate that publicly supported R&D subsidies will serve as substitutes for privately invested R&D expenditures. When the dynamic effect of these R&D subsidies is also taken into consideration, publicly supported ones will still give rise to a substitution effect with regard to privately invested R&D expenditures. However, the results will still have a lesser impact compared with those obtained using the panel data model.
